Automated Summary
Transaction Type
Bank guarantees for renewable energy projects under the REIP Procurement Programme
Key Facts
The applicant, Globeleq-Mainstream Renewable Power (PTY) Ltd, was appointed a preferred bidder for 12 renewable energy projects (6 wind, 6 solar) in 2021 under South Africa's REIP Procurement Programme. It provided R254.8 million in bank guarantees via ABSA Bank Limited. The applicant failed to meet conditions for 'Commercial Close,' leading to termination of its preferred bidder status in April 2024. The court ruled that guarantees for solar projects expired in June 2023, granting an interdict to prevent ABSA from paying them, while wind project guarantees remained valid as no Implementation Agreements were signed, allowing their payout.
Issues
- The judgment reaffirmed the autonomy principle, where guarantees are independent of underlying contracts. However, for solar projects, the guarantees' validity was tied to the Bid Validity Period and Commercial Close, which expired, whereas wind project guarantees remained valid under RFP terms.
- The court assessed the validity of the onshore wind project guarantees, which remained in force under the RFP terms as no Implementation Agreement was concluded. The Bid Validity Period was not extended, so the guarantees were valid when called up on 1 October 2024, and the interdict to prevent payment was refused.
- The court examined if the department's termination of the applicant's preferred bidder status for the solar projects (2 April 2024) and subsequent call for guarantees (1 October 2024) was valid. It concluded the guarantees had already expired for solar projects, making the call invalid, but valid for wind projects.
- The court determined whether the guarantees for the solar projects had expired by 30 June 2023, the end of the Commercial Close Period, rendering them invalid when called up on 1 October 2024. The guarantees were found to have lapsed, and the interdict to prevent payment was granted.
Holdings
- The court held that the guarantees for the solar projects expired on 30 June 2023 when the Bid Validity Period ended, rendering them invalid for the 1 October 2024 call-up. An interdict was granted to prevent ABSA from paying these guarantees.
- For the onshore wind projects, the court found no Implementation Agreement was ever concluded, so the Bid Validity Period remained unexpired. The guarantees for these projects were valid when called up, and the interdict application was refused.
Remedies
- The second respondent (Minister) ordered to pay the costs of the application on a party-and-party scale, with counsel's costs taxed on scale C.
- The court granted an interdict preventing ABSA from making payment of the guarantees issued for the solar projects (Bid Guarantee Nos. 0[...]).
Legal Principles
The court applied the purposive approach to interpret the terms of the bank guarantees in the context of their contractual scheme. It determined that guarantees remain valid until their expiry conditions are met, distinguishing between solar and wind projects based on whether implementation agreements were executed.
Key Disputed Contract Clauses
- Clause 3.3.1.2 of the Implementation Agreement states neither party can claim against the other for non-fulfillment of suspensive conditions after the Commercial Close Period. The court held this rendered the guarantees for solar projects invalid post-30 June 2023, as the department could not enforce them.
- RFP Clause 30.3 automatically extends the Bid Validity Period until Commercial Close for preferred bidders. The court interpreted this as applying to solar projects through the Implementation Agreement but not to wind projects, where no such agreement existed.
- Clause 1.8 of the guarantees permits the department to call upon the bank to pay if the applicant's preferred bidder status is revoked for any reason. The court analyzed whether this clause applied when the status was terminated in 2024, concluding it was valid for wind projects but not solar due to expired guarantees.
- Clause 4 of the guarantees specifies validity until the earlier of the Bid Validity Period's expiry or compliance with the Implementation Agreement. The court determined this period expired for solar projects on 30 June 2023, invalidating their call-up in 2024, while wind project guarantees remained valid due to no Implementation Agreement.
Precedent Name
- Joint Venture Aveng (Africa) (Pty) Ltd / Strabag International GMBH v South African National Roads Agency SOC LTD
- South African Nursing Council v Khanyisa Nursing School (Pty) Ltd and Another
- Minister of Transport and Public Works, Western Cape and Another v Zanbuild Construction (Pty) Ltd and Another
- Capitec Bank Holdings Ltd and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others
Cited Statute
Promotion of Administrative Justice Act
Judge Name
Millar J
Damages / Relief Type
- Costs awarded to the applicant with counsel's costs on scale C.
- Interdict against ABSA for solar project guarantees.
Passage Text
- [47] The only rider to them doing so and being able to call upon ABSA to honour the guarantees was that the guarantees in their terms were required to be valid. Having entered into an Implementation Agreement, the contractually agreed method for the determination of the Bid Validity Period could be exercised. In these circumstances, I find that the Bid Validity Period, as provided for in clause 4 of the guarantees expired on 30 June 2023 and that the guarantees in respect of the solar projects expired then in consequence thereof.
- [34] ... the autonomy principle, i.e. the autonomy of the performance guarantee from the underlying contract. The principle is best expressed in the oft-quoted passage from Lord Denning MR's speech in Edward Owen: 'A bank which gives a performance guarantee must honour that guarantee according to its terms. It is not concerned in the least with the relations between the supplier and the customer; nor with the question whether the supplier has performed his contracted obligation or not; nor with the question whether the supplier is in default or not. The bank must pay according to its guarantee, on demand if so stipulated, without proof or conditions. The only exception is where there is a clear fraud of which the bank has notice.'
- [51] Since it is not in issue that no Implementation Agreement was ever entered into in respect of any of the onshore wind projects, neither of the two events which represent the date of lapsing of guarantees for these projects has been reached. Accordingly, the guarantees in respect of the onshore wind projects remain extant and valid and were so when the guarantees for them were called up.