In Raubex Construction Pty Ltd v Bryte Insurance Company Ltd – ZASCA 14 the Supreme Court of Appeal recently addressed the interpretation of a Retention Money Guarantee (‘RPG’) concluded between a contractor and subcontractor.

The RPG was unconditional, save that receipt of demand was required to call up the guarantee. The contractor’s capacity to call up the demand for outstanding work was disputed, as it was alleged by the insurer that issued the guarantee that retention could only be withheld to remedy defects in the works which manifest after the completion of the contract, a position with which a Full Court of the Johannesburg High Court agreed.

The SCA however found that retention money could applied for any works as set out in the contract, and on a proper interpretation of the contract in the matter the contractor was entitled to withhold retention money in respect of incomplete works whether the arose prior to the issue of the certificate of completion or after.

 

The SCA also confirmed that the exact nature of a  guarantee such as the one in question was to be determined based on the terms of the guarantee, and especially when the guarantee is concluded as separately enforceable agreement.