Eskom Holdings Soc Limited v Hitachi Power Africa (Pty) Ltd & another

Eskom concluded a construction contract with Hitachi Power Africa (Pty) Ltd for works at the Medupi Power Station. To secure Hitachi’s performance, Mizhuo Corporate Bank Limited of Japan issued several guarantees in Eskom’s favour, three of which amounted to over R600 million. Disputes arose regarding Hitachi’s alleged material and ongoing breaches of the construction contract. Eskom sought to call up the guarantees, but Hitachi launched an urgent application in the South Gauteng High Court to interdict Eskom from demanding payment, arguing that Eskom was required to give prior notice before making demand. The High Court granted relief in favour of Hitachi, preventing Eskom from calling up the guarantees. Eskom appealed to the Supreme Court of Appeal.

The appeal was upheld. The order of the South Gauteng High Court was set aside, and Eskom was held to be entitled to demand payment under the guarantees issued by the bank.

The case reaffirms the autonomy principle applicable to on-demand guarantees in South African law, confirming that such guarantees are independent of the underlying contract and enforceable according to their terms. It provides important guidance for commercial parties and banks on the interpretation and enforcement of demand guarantees.