At
the hearing of this matter the plaintiff Bank was in default.
Counsel
for the defendant sought and was granted leave to argue the matter on
the merits. Judgment on the merits of the case was granted in favour
of the defendant with costs. I indicated that my reasons for
judgment would follow.
At
the pre-trial conference it was declared that this matter be referred
to trial as a Stated Case. The agreed facts were as follows;
1.
On 14 February 1992, the plaintiff and African Savanna Touring (Pvt)
Ltd entered into an agreement in terms of which the plaintiff lent to
African Savanna the sum of Pound Sterling 102,063= which sum was
repayable on certain terms and conditions which are not mentioned in
the instant case.
2.
By way of written guarantee dated 27 August 1992, the defendant
guaranteed the indebtedness of African Savanna Touring in an amount
not exceeding Z$600,000=.
3.
African Savanna Touring having breached the agreement entered into
between itself and the plaintiff;
the plaintiff instituted legal proceedings and obtained judgment in
the sum of Z$2,300,743=90. This judgment remains unsatisfied.
4.
By way of letter dated 21 June 1994, the defendant gave the plaintiff
notice of termination of the said guarantee with effect from 21 July
1994.
5.
On 11 October 1994, Northridge (Private) Limited (Insurance Agents),
representing African Savannah Touring Company, wrote to the plaintiff
requesting a copy of the old Financial Guarantee Bond 6260327187.
6.
By way of letter dated 20 October 1994, the plaintiff forwarded to
Northwood (Private) Ltd a copy of the guarantee. The plaintiff
retained the original guarantee.
The
plaintiff sues the defendant for payment of the sums indicated in the
guarantee in satisfaction of the judgment it obtained against African
Savanna Touring. The plaintiff contends that as the guarantee is a
guarantee in respect of only one transaction, and not a continuing
guarantee, the defendant was not entitled, at law, to withdraw from
the said guarantee and is therefore liable to effect payment.
On
the other hand, the defendant contends that it was entitled, as of
law, to withdraw from the said agreement and that even if it was not,
the plaintiff, in any event, accepted the defendant's termination
of the suretyship. Further, the defendant contends that, in any
event, the plaintiff's claim is prescribed.
At
the pre-trial conference, the parties adopted the following issues:
1.
Was the defendant entitled, at law, to terminate the guarantee on
notice?
2.
Did the plaintiff accept the termination?
3.
Has the
plaintiff's claim prescribed?
The
guarantee under consideration relates to a single transaction. As
such, at law, the defendant cannot resile from the arrangement.
In
Lennard
Clothing Manufacturing (Pvt) Ltd v Van Rhyn Interiors (Pvt) Ltd 1974
(1) RLR 207 the principle was established that where the obligation
of a guarantor relates to a single contract, such guarantee cannot be
terminated upon due notice. The answer to the first issue, therefore,
is that, at law, the defendant was not entitled to terminate the
guarantee.
The
guarantee was for an indefinite period. In other words, it would hold
for as long as the plaintiff remained indebted. For that reason, the
question of prescription cannot arise. In my view, the third issue
must therefore be decided in favour of the plaintiff;
namely, that the guarantee could not have prescribed.
However,
the plaintiff would appear to have accepted the cancellation of the
guarantee and must therefore be held to have waived any rights he
might have legally exercised in enforcing the same.
The
letter of termination, dated 21 June 1994, was forwarded to the
applicant, and, it would appear, was received by them on 23 June
1994, as evidenced by their date stamp that appears on a photocopy of
that letter. In addition, the applicants were duly advised by their
agents, Northridge Insurance Agents, of the cancellation. The
plaintiff's conduct, in not challenging the purported cancellation,
and, indeed, in returning the old guarantee, which had been requested
as a result of the purported cancellation, indicates that they had
indeed accepted the fact of cancellation.
It
was for these reasons that judgment was granted in favour of the
defendant with costs.
