Dormell Properties 282 CC v Renasa Insurance Company Limited and Others

Dormell Properties 282 CC was the employer in a JBCC Principal Building Agreement with Synthesis Projects Cape (Pty) Ltd for the construction of a shopping centre. Renasa Insurance Company Ltd issued a fixed JBCC construction guarantee intended to provide the employer with cash to complete the project if the contract was cancelled due to the contractor’s default. Due to delays, Dormell demanded an extension of the guarantee, which Synthesis refused. Dormell then purported to cancel the building contract on 28 February 2008 and on the same day demanded payment under the guarantee. Renasa rejected the demand, alleging the guarantee had expired at midnight on 27 February 2008 and that the guarantee was issued in favour of Dormell’s predecessor company, not Dormell. An arbitration between Dormell and Synthesis later found that Dormell had repudiated the building contract and that Synthesis had validly cancelled it.

The appeal was dismissed. The application to admit new evidence relating to the arbitration award was granted. The guarantee was held to have expired on 28 February 2008 and to be rectifiable in principle, but it was not enforceable due to the arbitration finding that the employer repudiated the contract. Costs orders were made as set out in the judgment.

The case clarifies that where a contract specifies a fixed expiry date, courts should not apply the civil method of time computation unless the contract requires calculation of a period. It also affirms that rectification of a written contract is possible without proof of an antecedent agreement, provided a common intention is clearly established. Importantly, it demonstrates that the enforceability of an on-demand construction guarantee may fall away where a competent tribunal determines that the employer, not the contractor, was in default.