Law Reports

A duty to protect

The following is one of the matters referred to the Attorneys Insurance Indemnity Fund, only after judgment was given in the Eastern Circuit Court in George.

Introduction
The plaintiffs sued the defendant for damages in the sum of R150 000.00 (later amended to R126 400.00).

Background Facts
Mr and Mrs B (the Plaintiffs) signed an offer to purchase two erven in a security village for the sum of R67 500.00 each. The development was marketed on behalf of the developer/seller, by K properties (the Agent).

The conveyancer, W, (the Defendant) who had done all the legal work in connection with the development, was instructed by the Agent to attend to the transfer. Thereafter the Plaintiffs paid the deposit into the Defendant's trust account. The conveyancer sent the Plaintiffs a letter confirming receipt of the Agreement of Sale and deposit and providing the Plaintiff with a receipt, a pro forma account, and an authority to invest the deposit.

All the documents reflected the details of the two erven and the pro forma account contained, inter alia, the following item:
"Opstel Koopkontrak, Toesien tot ondertekening en uitvoering 250.00


Almost a year later, on 12 April 2005, in a further letter, the Defendant informed the Plaintiffs that, in terms of the Agreement, they should, within 15 days of written demand, provide an approved guarantee for payment of the balance of the purchase price. The Plaintiffs made payment of the balance of the purchase price into the Defendant's trust account on 28 April
2005. (According to the Plaintiffs, the Defendant's conveyancing secretary had advised telephonically, that they could pay in the money any time before 30 April 2005.)

On 3 June 2005, the Plaintiffs who had bought the erven for resale, on sold one of them to a certain Mr D, for an amount of R150 000.00. The Plaintiffs later discovered that transfer of the erf to Mr D was not possible, as neither of the erven had been transferred into their names.

The Plaintiffs later discovered that the Agreement of Sale had not been accepted or signed by the Seller.

The Pleadings
In the Particulars of Claim, the Plaintiffs alleged that the Defendant owed them a legal duty to protect their interests. They alleged that this duty encompassed, inter alia,

  • perusing the Agreement of Sale and presenting it to the seller for acceptance.
  • advising the Plaintiffs if it showed any defects or omissions.
  • not to make any misrepresentations regarding the transaction or the validity of the Agreement
They alleged that, had the Defendant carried out his duty towards them, there would have been a binding agreement, the properties would have been registered in their names, and they would have made a profi t of at least R75 000 per erf on resale.

In his plea, the Defendant denied owing the Plaintiffs a legal duty and in particular any of the duties as pleaded by the Plaintiffs.

He averred that it was the Agent's duty to see to it that the Agreement of Sale was properly completed and signed.

He pleaded further, that, even if the Agreement had been signed by the Seller, the payment of the balance of the purchase price/guarantee had been out of time, and that the seller would have been at liberty to cancel the sale.

Judgment
The court isolated unlawfulness as being a central issue, citing the matter of Fourways Haulage SA (Pty) Ltd v SANational Roads Agency Ltd 2009 (2) 150 (SCA) where the test for the existence of a legal duty in the case of pure economic loss was discussed as follows:
The imposition of this legal duty is a matter for judicial determination involving criteria of public or legal policy consistent with constitutional norms. In the result, conduct causing pure economic loss will only be regarded as wrongful and therefore actionable if public policy considerations require that such conduct, if negligent, should attract legal liability.

The court took cognisance of the fact that the legal duty of an attorney towards a person who was not his client, was recognised in our law, as set out in the judgement in Road Accident Fund v Shabangu & Another 2005 (1) SA 265, as follows:
It is impossible to lay down an all embracing test as to when an attorney will be held to owe a legal duty towards a person other than the client particularly where, as here, that person relies on a negligent misrepresentation inducing a contract, or on negligent omissions on the part of the attorney to safeguard that person's interests when the attorney is performing the duty the attorney owes to the client. The question of wrongfulness that pertinently arises in each of such cases is essentially one of legal policy.

The court also referred to the judgment in Basson v Rimini and Another 1992 (2) SA322 N where the following was said:

In evidence, Mr Shelwell admitted, quite correctly in my view, that by accepting the appointment as conveyancer in respect of the transaction between the applicant and the first respondent, the second respondent became the agent of both parties.

The court held that:
  1. The Plaintiffs had a valid claim against the Defendant based on his legal duty to ensure that the purchasers' interests were protected during the transfer process.
  2. The Defendant accepted an instruction which, by virtue of his expertise as a conveyancer would affect the interests of third parties.
  3. The Defendant received money in trust, rendered a pro forma account and debited fees in respect of professional services (in particular, "vir die opstel van die koopkontrak, en vir Toesien tot ondertekening en uitvoering daarvan").
  4. In these circumstances a legal duty exists in accordance with the professional standards that the community would expect from persons in the position of the conveyancer.
  5. The negligent failure of the Defendant to protect the interests of the Plaintiffs was unlawful and rendered him liable for the damages suffered by the Plaintiffs as a result of his conduct.
  6. The Defendant was ordered to pay the Plaintiffs the sum of R126 400.00 together with interest and costs.


Lessons learned
It is clear that a conveyancer has a duty to reasonably protect the interests of both the purchaser and the seller and cannot 'hide behind' the fact that he was instructed by only the seller.

The conveyancer should ensure that all essential documents are in order before proceeding with further steps towards transfer.

Fatima Ebrahim Legal Adviser

Republished with permission from Risk Alert Bulletin

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