CONTRACT

Facts and issues: The parties concluded an agreement for the construction of civil services. Following termination, certain disputes arose between the parties relating to the completion of works envisaged in the contract, and the computation of the final account in respect of the work done. These disputes were referred for adjudication, resulting in the award. The applicant seeks that the respondent be ordered to comply with the award.

Discussion: At the heart of this matter is clause 10.6.1.1 of the contract. This clause provides that the adjudicator’s award shall be binding on both parties unless and until it is revised by an arbitration award or court, whichever is applicable in terms of the contract. The dispute revolves around the clause and the respondent’s failure to comply with the terms of the award, or if in disagreement with the award, the failure to refer the award for arbitration, within the prescribed period, to be dealt with as provided for in clause 10.6.1 of the contract. What the respondent has really done over the months since the award was made on 7 July 2023 can only be described as playing fast and loose with the applicant and making every possible attempt to keep moving the goalposts. The court need do no more than return the parties to clauses 10.6.1 and 10.6.1.1 of the contract, and paragraphs 17 to 20 of the award, and direct compliance with those clauses, and paragraphs. As such, unless and until set aside, the award stands, and the respondent must comply fully with its exact terms.

Findings: If the respondent was truly serious about challenging the award, it had more than ample opportunity and should have done do so timeously. Efforts to delay or avoid the obligation to pay the amount of the award are bound to yield only temporary respite for the respondent. Meanwhile, this heaps up undue and unwarranted hardship on the applicant. The respondent has only itself to blame for the inordinate delay in challenging the award, glossing over the vital issue of condonation and not providing an adequate explanation for the delay in filing the answering affidavit.

Order: The respondent is ordered to comply with the adjudicator’s award. The respondent is ordered to pay the applicant R5,883,920 (excluding VAT) in terms of the Adjudicator’s Award.

Facts and issue: The defendant accepted the plaintiff’s bid for a tender regarding procurement of necessary construction services. A contract was concluded between the parties. The parties had resolved and agreed that the determination of the remaining issue in relation to claim 1 will depend upon the court’s finding whether, the declaration of the National State of Disaster in terms of Section 27(1) of the Disaster Management Act, No. 57 of 2002 and the implementation of the nationwide lockdown, created a supervening impossibility for the defendant to make payment of the additional costs and time-related general items claimed by the plaintiff.

Discussion: The defendant relies on above regulation in that it provided or imposed restriction of movement and confined its personnel to their places of residence unless they were performing an essential service or obtaining an essential services or goods or services or collecting a social grant or seeking medical attention. The plaintiff submitted that supervening impossibility arises when, following the valid conclusion of a contract, fulfilling an obligation derived from it becomes objectively and permanently impossible through no fault of either party. The defendant submits that regulations so promulgated under the Disaster Management Act in response to curbing the spread of Covid-19 extinguished the defendant’s obligation to make payment of the additional time-related general items claimed by the plaintiff.

Findings: The court does not agree with the defendants’ contention that the declaration of regulations relating to State of Disaster to curb the spread of Covid-19 extinguished its obligation to pay but opted not to terminate the contract and performance of the works as provided for in clause 9 of the GCC. The declaration of regulations under the DMA did not create supervening impossibility for defendant to effect payment as claimed by the plaintiff. The lock-down prima facie proved hindrance to perform certain tasks but did not create permanent impossibility.

Order: The defendant is liable to pay the plaintiff in respect of claims 1 to 9. (See from para [1] of order for full amounts awarded).

Facts and issue: The point for determination in this application is whether the parties, through their attorneys, concluded a compromise or settlement agreement for the payment of the amount of R25,000,000 including for the provision of security and guarding services to the respondent by the applicant. The applicant stated that it was prepared to accept the offer, and its attorney advised the respondent’s attorney, by telephone of its acceptance. However, the applicant’s attorney inadvertently omitted to confirm its acceptance in writing.

Discussion: According to the respondent, its attorney clearly stated that any agreement between the parties would be subject to the respondent’s approval and reduced to writing. The negotiations were subject to verification, confirmation, and signing or approval by the respondent for a legally binding compromise agreement to exist. The applicant had the same understanding, it was contended. On the evaluation of the evidence, it is common cause that a period of about two years and nine months, there was no written communication or correspondence between the attorneys about the payment of the R25,000,000. The crucial question is whether a compromise was reached between the parties. In the court’s view, it was not. The applicant argued that the respondent’s erstwhile attorneys or Bokwa attorneys, had ostensible authority to act on behalf of the respondents. This is not an issue. The issue is whether a consensus was reached for R25,000,000 to be paid to the applicant by the respondent.

Findings: The applicant relies on telephone conversations to prove the acceptance of the offer. Save for the omission of accepting the offer in writing, the applicant failed to confirm the oral acceptance in writing subsequently. The applicant failed to confirm in writing subsequent alleged arrangements and re-arrangements between the parties surrounding the payment. No crucial witness testimony was presented to bolster the applicant’s case on the part of the oral arrangements. The applicant should have foreseen that a dispute of fact would arise and that motion proceedings were not the appropriate steed to saddle. No compromise was concluded between the parties due to the applicant’s failure to communicate its acceptance to the respondent.

Order: The application is dismissed with costs.

Facts and issue: The appellant assails the judgment and order of the court a quo on various grounds. The respondent instituted action against the appellant because of damages it sustained due to the appellant's repudiation of two written agreements. The court a quo found that in respect of the five-axle trailer, the payment of the 50% deposit constitutes a suspensive condition, and the respondent was not entitled to commence manufacturing of the trailer until the appellant paid the 50% deposit. However, the court a quo found that the appellant was aware that the respondent commenced manufacturing and did not contest the respondent’s entitlement to commence manufacturing. The respondent waived the suspensive condition. The appellant was accordingly held liable.

Discussion: The appellant contends that the agreements were subject to a suspensive condition that manufacturing of the trailers in the respective agreements could not commence prior to the payment of the 30% or 50% deposit respectively where the trailer was not financed by a South African Financial Institution, or a guarantee for the purchase price is to be provided by the appellant to the respondent if the trailer is financed by a South African Financial Institution. It was the evidence of Mr Flynn that there was a departure from the agreement as there was no deposit paid and no guarantee provided prior to the manufacture of the unit in both the four and the five-axle trailers, conceding non-compliance. There was no plea of a waiver nor was there any notice of a waiver. By demanding the payment of a deposit or providing a guarantee in January 2018, the respondent showed behaviour contrary to the conclusion of the trial court that there was indeed a waiver.

Findings: The respondent’s behaviour displayed no evidence of waiver, and no notice of waiver was given before expiry of any time limit set for fulfilment of the condition and before expiry of a reasonable time, having regard to Mr Flynn’s evidence. Both the four and five-axle trailer agreements are each subject to suspensive conditions. These suspensive conditions are constituted in the provisioning of a guarantee from a financial institution in respect of the four and five-axle trailer agreements and the payment of the 30% or 50% of the purchase price as deposit of the unit, each condition to be fulfilled prior to the manufacture of the individual units. No waiver took place. In the circumstances, the agreements never came into effect.

Order: The appeal is upheld. The plaintiff's claims are dismissed with costs.

Facts and issue: This is a case involving Business Email Compromise (BEC) affecting the sale of a motor vehicle. The applicants apply for an interim interdict to order the respondents to release a vehicle purchased by the first applicant, Movienet Networks. The respondent informed Pather through its legal representative that he had paid the deposit to a third party. The third party had allegedly intercepted and changed Pather’s email. Africa alleged repeatedly that neither the respondents received the deposit on the vehicle.

Discussion: The applicants seek the right to possession of the vehicle, not ownership. Pather states that he filed a complaint with the SAPS, provides the case number and states that the matter is under investigation. There is no explanation as to how the right of Movienet Networks to obtain possession of the vehicle through an interim interdict can be determined finally by a criminal investigation that could extend into perpetuity and produce an inconclusive outcome. Neither do they explain how a criminal investigation will resolve the question of liability for the deposit owed on the vehicle. The respondents also have an issue with the first part of the order sought, i.e., the reference to the “release” of the vehicle and the reference to the “applicant’s vehicle”. They protest that it is unclear what “release” of the vehicle entails, where the release should take place, and to whom the release should be made. The ownership of the vehicle is in dispute and can only occur upon full payment.

Findings: The respondents argue that the applicants have not made out a case for either interim or final relief, nor have they established the necessary elements to grant an interdict. They argue that an order cannot be given on the formulation sought by the applicants in the notice of motion. The relief sought is final in form. The court agrees. The application for interim relief falters in the preliminary step, and interim relief, as formulated by the applicants, cannot be granted. Granting the applicants possession of the vehicle would amount to final relief.

Order: The application is dismissed with costs.

Facts and issue: This is a claim founded on interim payment certificates arising from a building contract concluded by the applicant (Alto) and the respondent (Wingtip). Alto claims payment in the amended sum of R7,022,117.72 against Wingtip in terms of six interim payment certificates that were issued and signed by the quantity surveyor and certified by Wingtip’s duly appointed principal agent. Wingtip is resisting the claim.

Discussion: Wingtip contends seemingly in limine, that the application should be stayed pending referral of the matter to arbitration as the dispute between the parties is an arbitral dispute, placing reliance on the provisions of clause 40 of the agreement dealing with settlement of disputes. Wingtip’s reliance on the provisions of clause 40.1 is in the circumstances misplaced. From a proper construction of clause 40.1, the referral to arbitration must be preceded by either Wingtip (as employer) including the principal agent and/or the quantity surveyor giving Alto (as the contractor) notice to resolve the disagreements or vice versa. No such notification was given by any of the parties. In terms of clause 40.2, a dispute is deemed to exist only in the event where such disagreement is not resolved within ten days from the date of receipt of the notice. In the absence of such notification, no referral to arbitration of a “dispute” as so deemed in clause 40.2 could occur.

Findings: The “disputes of fact” on which Wingtip relies do not constitute real, genuine and bona fide disputes of fact within the ambit of payment certificates, with the attendant consequence that Wingtip’s contention in this regard is untenable. Wingtip does not contend that its agents acted fraudulently or exceeded their authorities or colluded with Alto in issuing, signing and approving the payment certificates. The purported “dispute of facts” or “defences” so raised by Wingtip being not real, genuine or bona fide, are in the circumstances untenable. They do not constitute sustainable defences in challenging or disputing the payment certificates.

Order: The respondent (Wingtip) is ordered to pay the applicant the sum of R7,022,177.72.

Facts and issue: The plaintiff issued summons against the defendant, in two different actions, for payment of certain monies arising from two building contracts for the construction of two rural schools. The plaintiff seeks payment of the monies against the defendant pursuant to a contractual claim. The court is called upon to make findings on the legality of the two contracts. The defendant pleads that the contracts are void ab initio for want of compliance with section 217 of the Constitution of the Republic of South Africa.

Discussion: The appointment of the plaintiff to build the schools was not done pursuant to an open, transparent, and competitive public procurement process, but followed the memorandum in which the HOD approved the request for deviation from the normal procurement process. The HOD as the Accounting Officer has the authority to approve such deviations, to deviate from following the normal procurement process. Deviations from the legislative prescripts are allowed in certain prescribed instances. It is common cause that the deviation from following the normal procurement processes was not reported to the Treasury and Auditor-General. It would lead to gross irregularities and be inherently unfair towards a private party where the Government Department fails to follow the correct internal procedures, and the private party suffers the damages for the inaction of the Department in failing to execute their internal departmental duties. In this instance, the contract was awarded as a deviation contract and the deviation was approved by the HOD. The failure of the responsible people to report the deviation to the Auditor-General and Treasury, cannot be laid at the door of the plaintiff.

Findings: When the Department was placed under Administration the work done on both sites were found to not be in accordance with the 2015 Agreement Certificate. The work was ordered to cease immediately. There was no process of cancellation followed in terms of clause 36.2 of the MOU, but the work was forced to halt in its tracks. This is a clear repudiation of the contract. The evidence before the court indicates that the defendant repudiated the contracts, and that the plaintiff accepted the repudiation and cancelled the contracts.

Order: It is declared that the plaintiff did not breach the terms of the contract. It is declared that the defendant repudiated the contract, and that the plaintiff accepted the repudiation and cancelled the contract. The case is postponed for determination of the quantum of the plaintiff’s claims on a date to be arranged with the Registrar.

Facts and issue: The applicant seeks is an order that directs the respondent to comply with the tender award conditions and agreement that was entered into between the parties, and to compel specific performance by the respondent of its’ contractual duty to deliver to the applicant the Management Information System (MIS System), that was purchased from and customised by the respondent.

Discussion: The respondent did not provide the MIS System to the applicant by 31 March 2020. The MIS System was eventually provided to the applicant by the respondent by about 1 July 2021. The applicant has complied with its contractual payment obligations towards the respondent. The respondent has to date refused to hand over the source code for the ETQA module to the applicant. It is this refusal that has resulted in the application before court. According to the respondent, the applicant was not entitled to the relief that it sought because it came before the court with unclean hands. The respondent asserted that during the currency of the contract between the parties, the applicant failed to perform certain specified agreement related tasks in a timeous manner. The respondent raised as an issue a procurement irregularity, internal to the applicant, that was reported to it by the applicant. This irregularity did not implicate the respondent but, according to the respondent, it detrimentally affected the relationship between the parties. It is not evident what steps, if any, the respondent took to protect its interests considering the alleged breach.

Findings: The respondent’s claim that the applicant breached the respondent’s intellectual property rights was not proven. The applicant’s other conduct that complained of by the respondent is not of such a nature as to move the court to take the drastic step of closing the doors of the court in the face of the applicant. The late performance of contractual obligations by the applicant is not, in itself, an extraordinary occurrence. The applicant’s conduct cannot be typified as being an abuse that so taints the applicant with turpitude that this court will refuse to come to its aid. The respondent’s defence based on the doctrine of unclean hands cannot succeed.

Order: The respondent is directed and ordered, within 10 days after service of this order, to perform its obligations the tender, and hand over to the applicant the source code for the Education Training Quality Assurance (ETQA) module.

Facts and issue: The parties concluded an agreement for the supply and the erection on the plaintiff’s property of a portal frame steel structure. Grid Electronics (plaintiff) alleges that SM Structures (defendant) breached the agreement in that it failed to complete the installation of the roof on the structure, in addition to it failing to deliver enough galvanised roof sheeting to complete the installation of the roof of the structure. Grid Electronics claims contractual damages arising from the alleged breach of contract by SM Structures.

Discussion: There is no merit in the defence raised by SM Structures relating to the supposed lack of locus standi on the part of Grid Electronics. That would also then take care of any dispute relating to the breach of contract by SM Structures. This is so because, during his viva voce evidence, Mr Maycock admitted that his company, SM Structures, had breached the agreement during or about October 2019 when it short delivered by 88 the chromadek sheets. SM Structures, by their ‘with prejudice’ tender, has also conceded that Grid Electronics suffered general or direct damages amounting in total to R75,458.50 in respect of the short supply of 88 chromadek sheets. The only remaining dispute between the parties as regards general damages is the amount of such damages.

Findings: Contractual damages is calculated on the basis that a plaintiff should be placed in the position he would have been in had the breach not occurred. That would be accomplished by supposing that Grid Electronics would have paid the whole amount of the contract price. A defendant would then be liable for the costs of remedying the defective performance on the assumption that the full amount of the contract price had been paid. The general contractual damages suffered by Grid Electronics as a result of the breach of the contract by SM Structures amounted to R103,618.45. Grid Electronics has not made out a case entitling it to special damages.

Order: Judgment is granted against the defendant in favour of the plaintiff for payment of the sum of R103,618.45 at the applicable legal interest rate of 7% per annum.

Facts: Lubavitch is a voluntary organisation aimed at enriching the lives of South Africans of Jewish extraction, with a special focus on promoting and protecting their social and economic interests. To that end, it runs a property management school for Jewish scholars. Lubavitch experienced financial difficulties and struggled to service its mortgage loan with Nedbank. It faced foreclosure by Nedbank, which had funded it to acquire the certain properties. The Krok brothers (Abraham and Solomon) redeemed the situation by taking over the Nedbank loan through Phoenix Salt, a shelf company which they controlled. Phoenix Salt and Lubavitch entered into a loan agreement in which Phoenix Salt would settle the Nedbank indebtedness of R5,2 million. Phoenix Salt took cession of Nedbank’s claims and rights in and to the mortgage bonds. The loan agreement included non-variation clauses.

Application: Phoenix Salt unsuccessfully sought payment of R2,886,005.20 from the Lubavitch Foundation. This appeal is against the judgment and order of the High Court, dismissing the application for the payment of monies paid in terms of the loan agreement. The issue in this appeal is whether Phoenix Salt, through the Krok brothers, waived its right to claim the remaining loan amount from Lubavitch, and if so, whether such a waiver is competent in the face of the non-variation clauses.

Discussion: The essential terms of the loan agreement were that the loan by Phoenix Salt was advanced to Lubavitch on the basis that Lubavitch sold to Golden Hands (which was owned by the Krok family) certain stands of property at exactly the same price as the loan amount of R5,2 million. Golden Hands intended to erect cluster houses on the four properties. Golden Hands never paid Lubavitch the purchase price for the properties. The Rabbi says that he had assurance from the Krok brothers, on numerous occasions, that Lubavitch would never be required to settle the debt, as the proceeds from the cluster development would be used for that purpose. Lubavitch submits that the Krok brothers, acting on behalf of Phoenix Salt, exercised a waiver to enforce its right of recovery against Lubavitch, while Phoenix Salt contends that the available evidence does not establish a waiver and that it is ousted by the non-variation clauses of the agreement. Phoenix Salt contends that an assurance by the Krok brothers that the loan would be repaid by Golden Hands rather than Lubavitch amounts to a variation or addition to the agreement which is precluded by the plain language of the non-variation clauses.

Findings: Phoenix Salt loses sight of the purpose and context in which the loan agreement was entered into. Golden Hands was represented by the Krok brothers when the loan agreement was signed. Phoenix Salt, through the Krok brothers, was at all times Lubavitch’s benefactor. Phoenix Salt’s contention that the non-variation clauses preclude the pleaded oral waiver by the Krok brothers conflates the distinct legal concepts of variation and waiver. Each of the two doctrines in the law of contract exists to fulfil different purposes. The relationship between the contracting parties and their conduct during the subsistence of a contract have a significant relevance in the process of interpretation. What the uncontroverted evidence clearly shows is that the Krok brothers conducted themselves in a way that demonstrates that they waived their right to enforce the terms of the loan agreement against Lubavitch. A waiver is the renunciation of a right, and when the intention to renounce is expressly communicated to the affected party, such person is entitled to act upon it. When the renunciation is evidenced by conduct inconsistent with the enforcement of the right or clearly showing the intention to surrender that right, the intention can be acted upon and the right perishes. The High Court’s finding that Phoenix Salt waived its right to call up the loan and to enforce payment is correct.

Order: The appeal is dismissed with costs, including the costs of two counsel, where so employed.

MBHELE AJA (MOCUMIE ADP, MATOJANE JA, MOLEFE JA and SEEGOBIN AJA concurring)

Facts: The appellant (Mpambaniso) entered into an oral agreement with Davison to invest his funds at his discretion with a proviso to pay the investment on demand which was confirmed by the email communication between the parties. This was correctly captured in a communication that the appellant wrote to Davison. It was the appellant's submission that the communication was a clear demonstration of Davison's directive for the money to be transferred to the SBA (Squirrel Benefit) account in conformity with the mandate to invest it at his discretion. It was also the appellant's further argument that Davison exercised the discretion bestowed on him and there was no reason to doubt the role he played in the investment of the funds and for their transfer into the SBA account. The appellant's claim was dismissed with costs by the court a quo in that the appellant failed to prove that his agreement was with Davison and that he had abandoned his claim against Squirrel Benefit.

Appeal: The appellant contends that the court a quo erred in its findings and was entitled to a judgment against Davison alternatively Squirrel Benefit. The core content of the argument raised by the appeal is to determine whether the appellant succeeded in proving his claim against Davison; abandoned his claim against Squirrel Benefit; and if both issues are in the negative, whether Squirrel Benefit's obligations were transferred to Squirrel Trust Administrators (Pty) Ltd (STA). The gist of the appeal was whether the court a quo was misdirected in determining the legal question regarding the correct identity of the contracting parties in the agreement.

Discussion: Did the appellant enter into a binding agreement with Davison or Squirrel Benefit, alternatively abandon his claim against the latter? The heart of Davison's objection to the appellant's claim was not based on the content of the agreement itself but the identity of the contractor, which is Davison and the mootness of the appellant's alternative claim on the adjudication of this matter. This was also the foundation of the court's a quo reasoning including the dismissal of the application for leave to appeal of its judgment. The court a quo did not give meaning and weight to the founding primary term of the agreement which was for Davison to invest the funds at his discretion. The court a quo did not consider the directive as per the agreement to be the primary source and substance of the appellant's claim. It also misapplied the facts which led to a misdirection of the law in determining the identity of the contracting parties in the dispute.

Findings: The court is persuaded by the principal term of the agreement which was correctly captured in the e-mail communication carrying a simple obligation for Davison to undertake the duty entrusted upon him which entailed more of a fiduciary responsibility towards the appellant. The court a quo put a blind lens on the fact that the appellant did not have a direct relationship with Squirrel Benefit. Davison failed to act genuinely in undertaking the aspirations envisaged in the agreement. Davison did not carry a mere exercise of a discretion in the investment of the funds but owed a fiduciary duty regarding the way in which he managed and administered the appellant's financial affairs. The court a quo misdirected itself by endorsing a well-calculated deception which focused on the identity of the contractor instead of the deeper analysis and review of the term of the agreement. The court a quo did not consider the substance of the agreement and is to be faulted by the misdirection it took by failing to give a proper interpretation of the term of "investing at his discretion and for repayment on demand" which could have provided an insight on the second question regarding the identity of the contractor. The court a quo limited its legal insight and role by the focus on the identity instead of the essential element of the terms of the agreement that could have been the determinant of the contracting parties.

Order: The appeal is upheld. The first respondent is liable to pay appellant R3,354,996.59.

NTLAMA-MAKHANYA AJ (COLLIS J concurring)

Dissenting: Mr Mpambaniso alleged that he gave the mandate to invest to Davison in his personal capacity. When he testified, Mr Mpambaniso expressly disavowed any reliance on his alternative claim against SBA. He explained that the alternative claim was introduced out of caution on the advice of his legal representatives but that it is no longer his case that the agreement was concluded with SBA. The court a quo held that the alternative claim had been abandoned. Given the facts, the court a quo cannot be faulted for finding that Mr Mpambaniso had in fact abandoned his alternative claim as against SBA. Davison at no stage acted in his personal capacity as administrator, and only conducted business through SBA. A juristic entity acts through its authorized officials. If a discretion is to be exercised by it, it follows that it does so through its duly authorized officials. Hence the mere fact that Davison was to exercise a discretion cannot, without more, lead to a conclusion that he was instructed to invest the funds in his personal capacity. The appeal should be dismissed.

RANCHOD J

Facts: Eskom contracted with Alstom to fabricate, paint and erect six ACC units at Eskom’s Kusile Power Plant. Alstom, in turn, subcontracted some of the work to DBT which in 2009 subcontracted some of its work to TCP. In terms of TCP’s subcontract it was required to provide an on-demand performance guarantee in favour of DBT with respect to the subcontracted works. Lombard Insurance (respondent) issued such a guarantee in favour of DBT for R128,375,851.20. The guarantee provided that the respondent held this amount at the disposal of DBT and undertook to pay to it on a written demand for payment, signed on behalf of DBT by an executive director thereof, stating that the amount demanded was payable to DBT in terms of the subcontract with TCP, and the circumstances of TCP’s breach under its subcontract. The appellants (Jorge and Sergio Da Costa Bonifacio) executed a Deed of Suretyship and Indemnity in favour of the respondent.

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Appeal: In 2020, a written demand, in compliance with the terms of the guarantee, for the full guaranteed amount, was submitted by DBT to the respondent. The respondent, relying on the terms of the indemnity, in turn demanded payment of the same amount from the appellants jointly and severally. When DBT’s demand to the respondent was not met, DBT launched an application in the High Court against the respondent claiming an order that it be directed to honour payment of the guarantee in the sum of R128,375,851.20 with interest. The appellants were advised that the respondent had concluded that it was in its best commercial interests to compromise and settle DBT’s claim and that such a settlement was clearly authorised by the terms of the indemnity. The High Court, in accordance with the terms of a settlement agreement, granted an order directing the respondent to pay to DBT an amount of R100 million in full and final settlement of all issues between them. In a later order, the High Court declared the appellants liable to pay to the respondent the sum of R100 million.

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Discussion: The appellants had opposed the claims against them inter alia on the basis that the calling up of the guarantee had been fraudulent. The High Court concluded that for the purposes of deciding the application it did not have to make a finding regarding the alleged fraud. On appeal the contention was that the High Court ought to have found that the settlement did not entitle the respondent to obtain an indemnity in terms of the third-party procedure, as that procedure entitled the appellants also to contest the claim by DBT against the respondent, but that this right had been affected, to their prejudice, by the settlement. The appellants’ specific complaint in their application for leave to appeal was that the settlement denied them the right in Rule 13(6) to file an affidavit to contest the claim of DBT against the respondent. There was no suggestion in the affidavits that the respondent had acted fraudulently or colluded in any alleged fraud by DBT. The high-water mark of the appellants’ case against the respondent was that the respondent had not investigated the claim by DBT against it sufficiently.

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Findings: The indemnity sought in terms of the provisions of Rule 13 was based on the contract of indemnity, the terms whereof made it clear that: the respondent was indemnified against any claim, or demand of whatsoever nature. The settlement simply quantified the amount of the claim. When the issues in the main application between DBT and the respondent became res judicata the amount of the appellants’ liability in terms of the indemnity was no longer dependent on an adverse finding against the respondent by the court. The settlement amount is the amount the High Court “ordered” the respondent to pay. If separate fresh proceedings were to have been instituted the appellants would still have been required to join DBT for the issue of fraud to be ventilated and adjudicated properly, and for any available right of recourse to be exercised against DBT. The issue of any fraud on the part of DBT was not an issue which properly arose for adjudication before the High Court, which was correct not to consider the question of fraud because it was not competent to do so on the pleadings. The appellants certainly had not been denied any procedural rights which would excuse them from liability.

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Order: The appeal is dismissed with costs, such costs to include the costs of two counsel.

KOEN AJA (PONNAN JA, NICHOLLS JA, MATOJANE JA and SEEGOBIN AJA concurring)