Bonifacio and Another v Lombard Insurance Company Limited

Lombard Insurance Company Limited issued an on-demand performance guarantee in 2009 in favour of DBT Technologies (Pty) Ltd for the due performance of a subcontract by Tubular Construction Projects (Pty) Ltd (TCP) in relation to construction works at Eskom’s Kusile Power Plant. In 2019, the appellants executed a Deed of Suretyship and Indemnity in favour of Lombard, indemnifying it against any liability arising from guarantees issued. In January 2020 DBT made a written demand for payment under the guarantee. Lombard resisted payment, alleging the demand was fraudulent, but later compromised and settled DBT’s claim for R100 million, which settlement was made an order of court. Lombard then sought to enforce the indemnity against the appellants. The appellants contended that the underlying demand was fraudulent and that Lombard’s settlement deprived them of a procedural right to contest DBT’s claim.

The appeal was dismissed with costs, including the costs of two counsel. The order declaring the appellants jointly and severally liable to indemnify Lombard for R100 million plus interest and costs was upheld.

The judgment reaffirms South African law on the autonomous nature of on-demand performance guarantees and clarifies that indemnifiers cannot avoid liability merely because a guarantor settles a claim, provided the settlement is authorised by the indemnity. It also underscores the limited scope of the fraud exception and the procedural responsibilities of third parties joined under rule 13.