In a May 2025 judgment, the High Court denied urgent relief to a contractor who was therefore unsuccessful in stopping the enforcement of a performance guarantee.
Two consortium members, operating together, were contracted to provide services on a windfarm project. According to the terms of the consortium agreement, the consortium member (A) assumed 29% of the liability, whilst the other consortium member (B) was responsible for the rest. To protect the project’s employer, a primary insurer issued a performance guarantee covering the total value of the project. A secondary guarantor then provided a “back-to-back” guarantee to the primary insurer for member A’s share.
Problems arose during the project which led the member B entering business rescue. As a result, the employer demanded payment in respect of the performance guarantee from the primary insurer. The primary insurer in turn made demand on the secondary guarantor for the portion of the performance guarantee it covered.
Member A sought an urgent interdict to stop the secondary guarantor from paying the primary insurer under the guarantee, alleging that no genuine liability existed for member A and that member B should bear 100% of the risk, since its alleged breach triggered the revision of the members’ respective liabilities. Member A further alleged that if the secondary guarantor paid the primary insurer in accordance with the demand, then it would be liable to the primary insurer when member B was in fact liable. Member A also claimed that the primary insurer’s demand for payment was made fraudulently or in bad faith because it knew that only Member B was responsible for the breach to employer.
Member A’s application was struck for lack of urgency. The High Court emphasised that it failed to demonstrate the imminent harm typically required to obtain an interim interdict. The court was not convinced that any prejudice it might suffer from the secondary guarantor’s payment to the primary insurer, could not be resolved through standard legal remedies in future. The court remarked that even after Member A decided it was no longer liable, it still took steps to renew the secondary guarantor’s guarantee. This behaviour was inconsistent with its later claims that the guarantee had become invalid.
When underlying agreements are altered – such as a consortium’s internal reallocation of liabilities – this does not necessarily affect the enforceability of performance guarantees from the perspective of third parties.
The case highlights how courts in urgent applications scrutinise the element of irreparable harm. Where a party fails to show that it stands to suffer immediate and serious loss if the guarantee is called upon, the urgency argument is likely to fail. Additionally, any allegations seeking to frame a call on a guarantee as “fraudulent” must be clearly substantiated; mere declarations of “not owing” under the underlying contract are insufficient where the guarantee remains in force.
Overall, the decision reminds us that in complex joint ventures and consortia, a guarantee issuer’s obligations remain intact unless the guarantee terms are formally adjusted to reflect changed responsibilities.