First Rand Bank Limited v Brera Investments CC

Brera Investments CC entered into a JBCC subcontract with Spirit of Africa Developments (Pty) Ltd for electrical works in a residential development. First Rand Bank Limited issued an independent payment guarantee in favour of Brera for nearly R13 million, expressly not a suretyship. The guarantee provided that First Rand would pay Brera if either a certified payment was not paid timeously, or if the contractor failed to issue a payment certificate within seven days of demand. In March 2011 Brera demanded the issue of a payment certificate for R1 065 864,29. The contractor failed to issue the certificate within the stipulated seven days, whereupon Brera made a compliant demand on First Rand under clause 3 of the guarantee. Only after litigation had commenced did a partial payment certificate for a much smaller amount get issued. First Rand refused to pay, contending that the later certificate extinguished or reduced its liability.

The appeal was dismissed with costs, confirming the High Court’s order that First Rand Bank Limited pay the demanded amount to Brera Investments CC under the payment guarantee.

The case reaffirms the autonomy principle governing demand guarantees and construction payment guarantees in South African law. It clarifies that liability under such guarantees is triggered by compliance with their terms and is not affected by subsequent events in the underlying contractual relationship. The judgment provides important guidance on the interpretation of payment guarantees in the construction and banking context.