The SCA allowed the appeal and held that a written undertaking given by a firm of practising attorneys was not an unconditional guarantee to pay. Having regard to the factual matrix providing the context in which the undertaking was given, it was not a personal guarantee to pay ‘regardless’. Evidence of the intentions of the parties regarding the undertaking was inadmissible.
Steyn Lyell Maeyane Attorneys v Oelofse (271/2016) [2017] ZASCA 18 (23 March 2017) per PB Fourie AJA (Leach, Tshiqi, Wallis and Mbha JJA)
Excerpts without footnotes
[1] The main issue in this appeal is whether a written undertaking (the undertaking) given by the appellant, a firm of practising attorneys, constituted an unconditional guarantee by the appellant itself to pay an amount of R1 million to the respondent. The respondent contended that it did and instituted action against the appellant in the High Court, Gauteng Division, Pretoria, for the payment of R1 million, as well as damages in an amount of R200 000, allegedly suffered as a consequence of the appellant’s failure to honour the undertaking. The appellant opposed the action.
[2] In the event, the trial proceeded before Prinsloo J who dismissed both claims with costs. The trial judge, however, granted the respondent leave to appeal to the full court of the Gauteng Division, Pretoria. The full court (per Legodi J, Molopa-Sethosa and Tuchten JJ concurring) upheld the appeal and granted both claims with costs. The present appeal is with the special leave of this court.
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[4] The undertaking has to be construed against the backdrop of the factual matrix providing the context in, and the purpose for which, it was given. As emphasised in Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593 (SCA) para 18:
‘The “inevitable point of departure is the language of the provision itself”, read in context and having regard to the purpose of the provision and the background to the preparation and production of the document.’ [1]
[5] In Frans Jacobus Kruger h/a Kruger Attorneys v Property Lawyer Services (Edms) Bpk [2011] ZASCA 80 para 8, this court too was concerned with the interpretation of a written undertaking given by a firm of attorneys. The following was said regarding the interpretation of the undertaking:
‘The letter of undertaking was issued pursuant to the bridging loan made by the respondent to Mr Bell and the trust. It must be construed in that context, the factual matrix in which the parties operated, so as to give it a commercially sensible meaning. It is clear from the wording of the undertaking that the appellant undertook to pay the amounts stipulated against registration of transfer of the properties . . . The real question, however, is not whether the appellant undertook to pay but what the content of this undertaking was.’
And further at para 10:
‘The undertaking is not to pay “regardless” but to effect payment from the receipt of the proceeds of the sales. Nor was it envisaged that the proceeds would vest in the appellant: by virtue of the “cession” the proceeds in the agreed amount had to be paid to the respondent. It would have been absurd for the appellant to have given an unconditional, independent undertaking in these circumstances . . . Seen in this context, the undertaking amounts to no more than an undertaking to make payment from the proceeds of the sales.’
[6] It appears from our jurisprudence that the word ‘guarantee’ is capable of bearing different meanings depending upon the context in which it is used. In List v Jungers 1979 (3) SA 106 (A) at 118D the following was said:
‘[It is] an unrewarding and misleading exercise to seize on one word in a document, determine its more usual or ordinary meaning, and then, having done so, to seek to interpret the document in the light of the meaning so ascribed to that word.’
And at 118E-G the court emphasized that the context in which the word is used is of prime importance and referred with approval to the following dictum in Hermes Ship Chandlers (Pty) Ltd v Caltex Oil SA Ltd 1973 (3) SA 263 (D) at 267:
‘The passages from the various judgments I have mentioned deal with popular or ordinary meanings of the word ‘guarantee’, but it seems to me that they demonstrate only that the word is capable of bearing different meanings depending upon the context in which it is used. It seems to me also that when the meaning of a word in a particular document is being considered, it is undesirable to commence the enquiry on the basis that any one of its possible meanings predominates, and that the proper approach to the question is to be alive to the various meanings which it can bear and by a consideration of the context in which it is used (together with such other circumstances as may be permissible) to decide which meaning must be attributed to it in that context.’
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[18] In the course of her argument, counsel for the respondent placed reliance on the evidence tendered by the respondent at the trial pertaining to his intention in regard to the required undertaking. She also criticised the appellant for failing to produce any witness to testify ‘as to the appellant’s intention in writing [the undertaking]’. This evidence of the respondent was clearly inadmissible – as would have been the case had the appellant tendered such evidence. It is trite that, in construing a document which was intended to be the sole memorial of the agreement between the parties, direct evidence by the parties of their intentions before or at the time of the formation of the written contract is inadmissible. As emphasised in Van Aardt v Galway [2011] ZASCA 201; 2012 (2) SA 312 (SCA) para 9, such evidence is also irrelevant and therefore inadmissible as ‘context’ in relation to the interpretation of the written document.[1]