Airports Company South Africa Ltd v Masiphuze Trading (Pty) Ltd and Others

In 2009, Masiphuze Trading (Pty) Ltd (first respondent) leased premises at King Shaka International Airport from ACSA (appellant) to operate a Wimpy franchise. The lease term was 1 May 2010 to 30 April 2015. Three shareholders of Masiphuze - Messrs Goldreich, Nemukula (third respondent), and O'Driscoll - signed a deed of suretyship (Annexure 5 to the lease) binding themselves as sureties and co-principal debtors for Masiphuze's obligations under the lease. Mr Nemukula was a non-executive director and investor who was not involved in operations, which were managed by Goldreich and O'Driscoll. He resigned as director in March 2014 but remained a shareholder. When Masiphuze fell into rental arrears in 2014, ACSA terminated the lease and sued for arrear rentals, damages for holding over, and ejectment. Masiphuze entered business rescue. The trial proceeded only against Mr Nemukula, who defended on the basis that: (1) the deed of suretyship did not comply with s 6 of the General Law Amendment Act 50 of 1956 because the names of sureties and principal debtor were not inserted in manuscript at the designated places in the document; and (2) he signed under justus error, not knowing he was signing a suretyship as his co-shareholders did not inform him of this fact. The High Court (Koen J) accepted his evidence and dismissed ACSA's claim.

• Whether a deed of suretyship complies with s 6 of the General Law Amendment Act 50 of 1956 when the names of sureties and principal debtor were not inserted in manuscript in designated spaces, but the sureties were identifiable from their signatures and the principal debtor identifiable from the attached lease agreement
• Whether a surety can rely on the defense of justus error when he signed a deed of suretyship without reading it, relying on co-shareholders (not the creditor) to inform him of its contents
• Whether extrinsic evidence is admissible to identify parties to a deed of suretyship and the principal debt
• What constitutes sufficient identification of material terms in a deed of suretyship for compliance with statutory requirements

The appeal was upheld with costs, including costs for two counsel. Paragraph 1 of the High Court's order was set aside and replaced with: (a) a declaration that the third respondent (Mr Nemukula) is bound by the deed of suretyship; and (b) an order that the third respondent pay the plaintiff's costs up to 15 June 2018. The case was remitted to the trial court for determination of amounts owing under the lease and suretyship, including damages for holding over.

A deed of suretyship complies with s 6 of the General Law Amendment Act 50 of 1956 if it identifies the sureties, principal debtor, and principal debt, even if not expressly stated in manuscript insertions, provided these are sufficiently identifiable from the document itself and incorporated documents, with the assistance of extrinsic evidence where necessary. The sureties can be identified by their signatures as "the undersigned" and the principal debtor and debt by reference to an attached lease agreement. A party cannot rely on justus error to escape liability under a suretyship where: (1) the creditor made no misrepresentation; (2) the creditor did not know or have reason to know of the mistake; (3) the party's own failure to read the document led the creditor reasonably to believe the party intended to be bound; and (4) any misleading conduct was by third parties (co-shareholders) rather than the creditor. A contracting party bears the risk of signing documents without reading them in the absence of misrepresentation by the other contracting party.

The Court noted that when multiple parties must sign a document, one necessarily signs first and others later, and this temporal sequence cannot affect statutory compliance with s 6. The Court observed that there could never be a valid agreement of co-suretyship if the absence of all signatures at the time the first surety signed rendered the document non-compliant. The Court also made obiter comments approving the approach that a contracting party generally has no duty to inform the other party of proposed terms unless they are terms that could not reasonably have been expected. The Court noted that Mr Nemukula's claim that certain pages may not have been in the document when he signed was not pleaded and was inconsistent with his other evidence. The Court commented that it would have been impractical for ACSA to call Messrs Goldreich or O'Driscoll as witnesses given they were also being sued on the same suretyship, and that if anyone should have called them it was Mr Nemukula to corroborate his version.

This case clarifies the requirements for validity of deeds of suretyship under s 6 of the General Law Amendment Act 50 of 1956, particularly regarding identification of parties and the principal debt. It confirms that strict literal insertion of details in designated blanks is not required if the parties and obligations are otherwise clearly identifiable from the document read as a whole and from attached documents. The judgment reinforces the narrow scope of the justus error defense in South African contract law, emphasizing that contracting parties bear responsibility for reading and understanding documents they sign, and that mistakes induced by third parties (rather than the other contracting party) will not ground a successful defense. It also confirms that a contracting party has no general duty to inform the other party of terms unless they are unexpected or unusual, and that extrinsic evidence may be used to identify (but not supplement or vary) terms of a suretyship agreement.