Zungu-Elgin Engineering (Pty) Ltd v Jeany Industrial Holdings (Pty) Ltd and Others

Zungu-Elgin Engineering (Pty) Ltd (the appellant) was obliged under a contract with Sunrise Energy (Pty) Ltd to provide a performance guarantee. Hollard Insurance Company Ltd issued the guarantee. Jeany Industrial Holdings (Pty) Ltd and its directors, Ian and Lee Donjeany (the respondents), bound themselves as sureties and co‑principal debtors for Zungu-Elgin’s obligations to Hollard. When Sunrise called up the guarantee in February 2015, Hollard paid Sunrise approximately R33.9 million in March 2015. Zungu-Elgin was placed under business rescue on 11 March 2015. Hollard later obtained judgment against the respondents, who ultimately paid Hollard R250 000 in settlement. The respondents then sued Zungu-Elgin for reimbursement based on the surety’s right of recourse. Zungu-Elgin resisted liability, arguing that the debt arose before business rescue and was therefore unenforceable under s 154(2) of the Companies Act 71 of 2008.

The appeal was dismissed with costs, confirming the summary judgment granted against the appellant.

The case clarifies the interaction between the law of suretyship and business rescue under the Companies Act. It confirms that s 154(2) does not change the common-law rule on when a surety’s right of recourse arises, providing certainty to sureties and co‑principal debtors dealing with companies under business rescue.