Neutral citation: Margalit v Standard Bank of SA Ltd (883/2011) [2012] ZASCA 208
Coram: Nugent, Leach and Pillay JJA and Southwood and Erasmus AJJA
Heard: 21 November 2012
Delivered: 03 December 2012
The appellant sold an immovable property he owned in Johannesburg for R3 million and instructed a firm of attorneys to effect transfer to the purchaser. The property was bonded to Standard Bank, and in order for transfer to be effected, its bonds over the property had to be cancelled. Standard Bank instructed the second respondent, a firm of attorneys, to act on its behalf in cancelling the bonds. The appellant received his purchase price only after considerable delay in effecting transfer.
The appellant sued both Standard Bank and the second respondent for damages, alleging that he had lost interest on his purchase price as a portion of the period of the delay had been due to negligence on the part of the second respondent. The claim succeeded in the magistrates’ court but that order was set aside on appeal to the high court.
Negligence on the part of the second respondent, and not wrongfulness was the crucial issue that had to be decided. In ruling that that the second respondent had been negligent in the manner in which it had dealt with the cancellation of Standard Bank’s bonds the court looked at the role of a conveyancer:
At [ 23 ]"A conveyancer is of course ‘an attorney who has specialised in the preparation of deeds and documents which by law or custom are registerable in a deeds office and who is permitted to do so after practical examination and admission . . .’4 Like any other professional, a conveyancer may make mistakes. But not every mistake is to be equated with negligence, and in a claim against a conveyancer based on negligence it must be shown that the conveyancer’s mistake resulted from a failure to exercise that degree of skill and care that would have been exercised by a reasonable conveyancer in the same position. As was remarked many years ago by De Villiers CJ, in a dictum recently followed by this court:5
‘I do not dispute the doctrine that an attorney is liable for negligence and want of skill. Every attorney is supposed to be proficient in his calling, and if he does not bestow sufficient care and attention in the conduct of business entrusted to him, he is liable, and where this is proved the Court will give damages against him.’6
[25] Of course the gravity and likelihood of potential harm will determine the steps, if any, which a reasonable person should take to prevent such harm occurring. Moreover, the more likely the harm the greater is the obligation to take such steps. No hard and fast rules can be prescribed. Each case is to be determined in the light of the particular facts and circumstances. But in the case of a conveyancer, it is necessary to remember that any mistakes which may lead to a transaction in the deeds office being delayed will almost inevitably cause adverse financial consequences for one or other of the parties to the transaction. It is for that reason that in Christie: Fourie’s Conveyancing Practice Guide (2 ed) it is observed that the financial aspects of a transfer of property are of great importance and that negligence or mistakes on the part of a conveyancer can lead to financial loss to clients rendering the conveyancer liable for damages.7
[26] To avoid causing such harm, conveyancers should therefore be fastidious in their work and take great care in the preparation of their documents. Not only is that no more than common sense, but it is the inevitable consequence of the obligations imposed by s 15(A) of the Act as read with reg 44, both of which oblige conveyancers to accept responsibility for the correctness of the facts stated in the deeds or documents prepared by them in connection with any application they file in the deeds office."
Turning to the various delays which occurred the court found that the absence of an explanation as to how the second respondent who was in possession of a copy of the title deed which showed two bonds registered over the property, yet prepared papers relating to the cancellation of only one bond, leads one to the inevitable conclusion that the standard of care exercised fell well short of what was expected of a reasonable conveyancer. As a conveyancer should be fastidious in examining the documents lodged in the deeds office, it therefore concluded that the high court had erred in finding that the respondents were not liable to the appellant. The appeal succeeded and the high court’s order was set aside.
4 Nel Jones Conveyancing in South Africa (4 ed) at 16.
5 Steyn v Ronald Bobroff & Partners (025/12) [2012] ZASCA 184 para 3.
6 Van der Spuy v Pillans 1875 Buch 133 at 135.
7 At 18.
Reader Comments:
I would have thought that it was the transferring attorney's duty to ensure linking of all cancellations. What would have been the position if the 2nd bond was a 3rd party bond? Transferring attorney is the conductor!
Must the transferring attorney also supervise the cancellation of multiple bonds by the banks appointed attorney's without remuneration? I think not ! The transferring attorney's in general expect the bank's bond cancelling attorneys to know what they are doing, since the bank has appointed them on their panel and they must have complied with very onerous terms and conditions to get onto that panel.
The transferring attorney must check the title deed and do a search, and then ensure that, when he/she does the linking, that all relevant deeds are in the batch. Obviously , if the cancellation attorney makes a mistake in consent or procedure, as in this case, he is liable. But if only 1 bond is received, as often happens, must the cancellation attorney, for the pathetic fee involved now do the bank's work as well? Another interesting aspect: can the cancellation attorney be liable to the seller? Is there a duty of care? Certainly no vinculum juris?
Both the transferring and cancellation attorneys get to see the Holding Title, but the transferring attorney is given discharge figures by the cancellation attorneys (who are privy to who holds the bonds over the property). Why should the transferring attorney be held responsible? In any event if there is a bond ifo a 3rd party, the bank usually calls for a copy of the 3rd party bond and this with their bond - so again the bond would or should transmit the 3rd bond to the cancellation attorney.
I agree fully with Anville van Wyk. I cannot follow the reasoning of either Felice Capriello or Siva Naidoo. The primary responsibility for ensuring that all bonds are lodged for disposal must lie with the transferring conveyancer. I would have thought that that was self evident. Just what was the transferring conveyancer looking at when he/she drafted and prepped the transfer documents? How could they have missed the 2nd bond which would have been endorsed against the holding title?
Did they read the holding title when prepping the transfer, and if so how did they miss the 2nd bond? I can likewise not understand Sivas comments about the 3rd party bond. What banks may, or may not ''usually do'', are irrelevant. There are clearly some unsatisfactory aspects about this judgement.
It is, sometimes and specifically in instances such as these unfortunately, the transferring attorney's duty to even oversee all links in a transaction, being the attorney in control of the transfer. Even though it can be expected of all other attorneys, registering and cancelling bonds linked to the transaction, to perform in terms of their instructions from the financial institutions, the transfer attorney is still in control and should ensure that all linkings are properly executed.
I have another egg to lay. What I am going to say is not intended personally against the transferring attorney in this case, but this is a very interesting and very important aspect for conveyancers. The transferring conveyancer in this matter, according to the record of the judgment also acted for the plaintiff. Was that ethical? Because had his client been referred to another attorney, the plaintiff could have landed up with somebody who shared the views of John, Chris and myself.
I agree fully. It is surprising that this was not raised in Court.
The Gauteng Law Council some years ago produced a loose leaf publication of "Rulings" of which a section deals with "Guidelines for Conducting Property Law Matters". This addresses, inter alia, "Ethics and Honesty" and "The relationship between the Conveyancer / Seller / Purchaser /Mortgagor / and Mortgagee". The SCA Judgment is with respect correct in its finding of negligence on the part of the second respondent. However, as has been alluded to in the comments above, this was a not so amusing comedy of errors, and the litigation costs would have far outstripped any damages suffered. But for the initial delay in obtaining a rates clearance certificate, I do not believe ordinarily a delay of about six weeks would have given rise to the litigation which ensued. One thing is abundantly clear, and every conveyancer knows this, the conveyancer who receives the instruction to attend to the transfer is entirely responsible for the transaction, and for and ensuring it is properly registered in a timeous manner.
Fundamental step one is a Deeds Office search, which is required for numerous reasons, the most important of which is to check the Deed of Sale, the Seller and the property information, and the incumberances. Every conveyancer knows that you cannot rely on the bank staff to provide accurate information, and you cannot rely on the legal secretaries of other firms. Hence the need of the conveyancing attorney to drive the entire transaction. This is academic comment, and it is necessary to state that there appears to have been negligence on the part of every firm of attorneys involved because every firm had a duty to check the fundamentals, including the bond attorneys who had to ensure that the guarantee conditions were fulfilled, and that would have included checking that all bonds over the property were simultaneously cancelled. We all know that in the course of a busy practice that mistakes happen and rejections occur often where not justified.
Notwithstanding, there is a tendency for some conveyancers to adopt the approach of lodging and "seeing if the batch is rejected" before applying their minds to the issue to get it right. Persons omitted from this debacle are the Seller himself, and the Estate Agent. Conveyancers are well aware that one cannot rely on any of them. Hence the ultimate responsibility falls with the conveyancing attorney who received the instruction to do the transfer.
I gave expert evidence on this matter in the Magistrate’s court. An interesting cacophony of bad luck occurred in this matter like some of our matters. The main reason why I thought that the bond cancellation attorneys ( hereinafter referred to as "the firm") were not negligent in my expert summary was as follows:
1. The Johannesburg firm received instructions for cancellation in June 2007 without the original bond documents from the bank;
2. The firm immediately requested a copy for information of the title deed from the deeds office and this copy only reflected one bond to be cancelled and the second bond endorsement was not reflected on the title and only on the search ( which often is a mistake in data);
3. The firm received instructions from the bank to apply for lost copy of the lost bond and the firm did so by signing the application via their Pretoria agents. During 2007, this was the main method in the deeds office to apply for lost copies. Only in January 2008 was the Chief Registrar’s Circular issued that required the bank itself to sign the application for lost copies and not the attorneys on behalf of the bank. This consent was signed by the Pretoria agents themselves on 18 September 2007 as this was still the accepted practice at this stage;
4. The first time that this matter was lodged ( 11 months after receiving the instructions….which delay was caused by Johannesburg Council taking 11 months to issue a clearance certificate) the first deeds office rejection was because the second bond did not reflect on the deeds office copy of the title deed ( See deed office note “Verkry ‘n volledige afskrif van T 32673/1987 want B 39663/1991 kom nie voor op ons afskrif nie”). My opinion was that the firm could not be held responsible for an omission ( of the second bond endorsement) on the part of the deeds office. So, only in May 2008 did the firm know that a second bond really existed;
5. On 28 May 2008, the firm sent a Consent for and application for a lost ( second) bond in terms of 68(11) to the bank. It was now 2008 and the firm had to get the bank itself to sign the application. The Pretoria agents could no longer sign the application themselves as the Chief Registrar's Circular was now in place;
6. The bank duly signed the consent and the matter was lodged for a second time. On 13 June 2008, the matter was rejected again by the deeds office because the first consent (which was signed by the firm's agents in Pretoria in 2007 …..that is, before the 2008 Circular had come into operation) was not signed by the bank itself. In my opinion, this should not have been a rejection as the Circular only came into operation in 2008 and the Circular could not have been retrospective: in other words, in respect of matters that had already been signed by the end of 2007, these matters should not have to be redone;
7. A new consent was immediately prepared for the bank to sign and the matter was re lodged again on 2 July and registered on 16 July.
8. Another aspect that caused the delay which in my opinion was not the firm's fault was the fact that this matter took more than one year to register. When the initial bond cancellation figures were requested, the guarantees for that initial amount were duly delivered by the transferring attorneys to the firm at the beginning of the matter. No one foresaw that it would take 11 months for the matter to get to the deeds office. 11 months later, the bond cancellation figures had changed. The bank required extra money, albeit only about R 4 000,00 to cancel the bond and in my opinion, the firm was proactive in lodging the 2 bond cancellations without even having a guarantee for this R 4 000,00 from the transfer attorneys. This guarantee was delivered to the firm on prep so the firm actually saved time ( and the delays of having to wait for a guarantee to lodge) in this way.
9. In my opinion, it was the seller himself who should have advised that he had 2 bonds on the property and not only one as was the perception for 11 months. The transfer attorneys should have had this information and should have realised that he had 2 bonds on the property. When only one bond was being dealt with, the seller and the transferring attorneys should have realised that something was wrong and that an omission was being made. It was mainly for the above reasons that I agreed to give expert evidence on the firm's behalf.
My expert evidence was mainly that one should not make a Registrar’s Circular retrospective was not dealt with by the magistrate in the first court. My point that one cannot insist on a bond being cancelled without furnishing the correct guarantee to a bank was accepted by the High Court judge on appeal but was not accepted in the Appellate Division. It shows one that some conveyancing matters go easy and without strife.....others ...not so!!!
John Louro
Our firm experienced more or less the same issues in about September 2010, which throw light on the two Margalit judgements. The bank concerned (which I will not identify) instructed us to recover a mortgage loan debt and by implication cancel the appropriate mortgage bonds. I say appropriate, because there was no clarity as to how many mortgage bonds were in fact to be cancelled. This was because the bank itself did not know, the borrower did not know and the Deeds Office records were incorrect and misleading. We subsequently came to realise that the bank's records at the time, were so primitive that they did not link and electronically record how many and which bonds were linked to the particular home loan account number. So if one requested the bank to advise how many bonds or which bonds were linked to a particular account number, it could not tell you; unless the file was physically produced and opened, to reveal what documents lay inside. The bank provided us with only one mortgage bond for cancellation; when in fact, after an extraordinary run around, it emerged that there actually 4 mortgage bonds to be cancelled.
We also were accused of not taking sufficient care in searching the Deeds Office records because we should have discovered that there were another three bonds to be cancelled. However no matter how hard and how thoroughly we researched, we were unable to find out the real situation because the Deeds Office records were also incorrect. Our initial search revealed that there were no other bonds to be cancelled. However, much to our surprise after a rejection, it turned out that one of the bonds, which still had to be cancelled, was incorrectly recorded by the Deeds Office as having already been cancelled. It was categorised as a prior or dead bond in the "History Section" of the endorsements in the search. Similarly, our lost copy application in terms of Regulation 68, which traditionally was always signed by our conveyancer, was suddenly rejected because the Deeds Office, without warning required a bank employee to sign the application. Just a week before, (in mid-January 2010) a different lost copy application was passed and registered by the Deeds Office, where our conveyancer signed the application in place of any bank official.
We were caught by surprise by this new ruling. So we resisted the charges of negligence, because we would not take the blame for: the bank itself not knowing how many mortgage bonds required cancellation, the bank only sending us one bond for cancellation, (with the other 3 having been lost), the Deeds Office records being blatantly wrong and misleading and the borrower and her husband being adamant that she had only signed one mortgage bond; when she had actually signed 4 mortgage bonds. Another fact strangely similar to the Margalit matter, was the fact that the transferring attorney was told on two different occasions by my secretary that there seemed to be more than one bond to be cancelled and that we should not proceed on the basis of cancelling only one mortgage bond. The seller's transferring conveyancer was adamant that, because she had the right to determine the linking and simultaneous transactions, we should nonetheless lodge only one bond cancellation (the Deeds Office records showed that there was only one bond to be cancelled) and that we should just lodge on the basis of this one bond cancellation. In our subsequent defence, we successfully alleged negligence on the part of the transferring attorney for failing to heed our warning that there appeared to be more than one bond for cancellation.
It is obvious that she negligently and wrongfully overruled our bond cancellation secretary and turned a blind eye to our warning of the possibility that there were more bonds to be cancelled. In the circumstances we did everything possible to attend to the matter on a thorough and professional basis, applying the appropriate standard of care which any other firm would have applied and clearly there was no basis to accuse us of any negligence. The South Gauteng trial - similarly, in the South Gauteng High Court trial in which Meir Margalit sued the Standard Bank and Nelson Borman as bond cancellation attorney, the judgement reveals that, Margalit's transferring attorney was not aware of the fact that there was a second bond to be cancelled. Meir Margalit was not aware of the second bond and Nelson Borman also were not aware of the second bond. The subsequent Appellate Division judgement at paragraph 12 refers to a suggestion that the reference to a single mortgage bond was due to an error in the Deeds Office. It is very probable that the Deeds Office records in June 2007 in Margalit's matter were also wrong and failed to disclose the second bond that required cancellation, because this is what actually happened in our matter. Further, the South Gauteng judgement referred to the change in signing arrangements for the lost document affidavit which resulted in a rejection, because the Deeds Office would no longer accept signature by the bank's attorney.
We were also not aware of this change. However, our Reg 68 applications for certified copies, which were signed by our conveyancers, were still being accepted and registered in January 2010. Margalit alleged that it was negligent of the bank not to know that two mortgage bonds were in existence; but the court held that Margalit failed to adduce sufficient evidence as to the appropriate standard of care required of a commercial bank in the circumstances. Similarly Margalit failed to lead evidence that Nelson Borman acted unlawfully vis-a-vis himself, in allegedly failing to take due care with regard to the cancellation of the bond. The court declared absolution from the instance due to insufficient evidence and thereafter Margalit appealed to The Appellate Division.
The Appellate Decision - The appellate judgement highlighted the following: that the Standard Bank had lost the deed of transfer as well as the two mortgage bonds. It also reiterated the fact that Margalit, the Standard Bank, the transferring attorney as well as Nelson Borman were all under the mistaken impression that there was only one single bond to be cancelled. At clause 28 of the Appellate Decision, we read that on 14 September 2007 Nelson Borman sent an information copy of the deed of transfer to the transferring attorney, which reflected an endorsement of two mortgage bonds. But then, according to Miss Venter who gave evidence on behalf of Nelson Borman, the Deeds Office subsequently informed them that for some unexplained reason, one of the copies of the title deed it held, was endorsed with only one bond. This provided the foundation for Nelson Borman to argue that they could not have known about the second bond and therefore had not acted unreasonably in applying for the single bond to be cancelled instead of both bonds being cancelled. Most conveyancers will not be surprised in having to contend with inaccurate Deeds Office records, which are becoming more and more inaccurate.
What is surprising is the fact that the normal Deeds Office search (instead of prior title deeds) was not produced as evidence to explain what the final position was. The court held, in the absence of an explanation from whoever acted for Nelson Borman, that that person did so negligently because he/she failed in their task to fastidiously examine all the relevant documents. The standard of care exercised, fell well short of what is expected of a reasonable conveyancer. The judgement also noted that there is a suggestion that this was due to an error in the Deeds Office but as to how Nelson Borman came into possession of a copy of the title deed that bore an endorsement of only one mortgage bond (which was not introduced into evidence) is unclear, as neither the secretary and neither the conveyancer involved, gave evidence.
The Chief Registrar's Circular RCR 20 of 2007 - is it irrelevant? The issue of a bank's conveyancer no longer being allowed to sign any "reg 68 affidavit" and application for the issue of a certified copy of a lost title deed and/or mortgage bond in a representative capacity on behalf of the bank, as was the long established practice, is perplexing. The Appellate Decision relies on and attaches great importance to Chief Registrar's Circular RCR 20 of 2007 as an authority for stipulating that an application for a certified copy can no longer be signed by the attorney. However RCR 20 of 2007 has nothing to do with who may sign affidavits and applications for lost copies. The resolution does not even mention affidavits. It only deals with prior VA copies and nothing else. So, with respect, was the Appellate decision based on a false premise?
Judge Leach seemed frustrated as he said not only was there was no evidence that Nelson Borman did not know of this new practice requirement of not being allowed to sign affidavits and applications for lost copies... He accordingly inferred that they knew of the practice prescribed by RCR 20 of 2007... But the point is that this resolution does not prohibit conveyancers from signing on behalf of the bank. If Nelson Borman was declared to have knowledge of the resolution, this does not mean that it should have known that they could no longer sign on behalf of the bank. If the Circular had nothing to do with who may sign, when and how were all conveyancers including Nelson Borman, expected to foresee any rejections caused by this change? We also did not receive notice of this change. These new signing arrangements were certainly not introduced by Resolution RCR 20 of 2007. I believe that most conveyancers also were not forewarned about this change and could not have been expected at the time, to have anticipated that they would have to change their signing arrangements in the absence of any prior notice.
With regards to the culpability of Standard Bank for losing the title deed and both mortgage bonds, the court regarded this as a complication (despite the fact that Margalit also claimed damages against Standard Bank) and accepted evidence that the loss of documents of this nature is almost an everyday occurrence. But we all know that more often than not, deeds were not lost every day. Some banks much more rigorous in controlling the filing of their deeds than others were. The appeal was upheld because it found negligence on the part of Nelson Borman and there is no mention of whether not Standard Bank itself was negligent. Significantly Judge Leach, stated that the expert evidence did not deal pertinently with explaining all the issues relevant to the negligence of Nelson Borman.
Over the years the courts have on many occasions bemoaned the fact that conveyancing and Deeds Office procedures are mystifying and confusing. The bottom line is that these two Margalit judgements do not fully get to grips with what really happened. The Appellate decision seems to reflect a frustration that Nelson Borman did not lead sufficient evidence to fully present its case. It really is about time that the Deeds Office officials are subpoenaed to give evidence to assist the courts in fully understanding the inner workings of Deeds Offices.
What is absolutely clear amongst all of this uncertainty and mystery, is firstly, the fact that if Standard Bank had not lost any of its documents, there wouldn't have been any title deed delay and Margalit would not have had any reason to claim damages therefore. Secondly, if the Deeds Office records had been completely accurate, both the bond cancellation and transferring attorneys would, no doubt have had no problem in ascertaining that there were 2 bonds to be cancelled. Nobody would have had any need to produce different deeds of transfer, which, on the one hand showed an endorsement of only one bond and the other hand, an endorsement of two bonds. Thirdly, most conveyancers were not given advance warning of the fact that they could no longer sign applications for lost title deeds, as representatives for the banks. Where did this ruling come from? How was this ruling communicated to conveyancers in general? Why should conveyancers be blamed for this unannounced change? Fourthly, The Chief Registrar's Circular RCR 20 of 2007 only refers to VA copies and makes no mention of who may sign. So therefore, with respect, how could we expect Nelson Borman to foresee this problem and to be held negligent therefore? In my experience, most conveyancing disasters and rejections are generally always the result of a collision of coincidences;- for instance, the bank losing its documents, the Deeds Office losing its records and the municipality probably also losing its rates records: all happening at the same time !
Nobody can be expected to foresee all these calamities happening at the same time. Surely the greater the number of coincidences, the more remote the duty of foreseeability must be. In conclusion, I have a sense of unease, as I feel that Nelson Borman's case and/or its evidence was lacking. Had it have been more effective in presenting its case, it may well have persuaded the courts to find that it was not negligent.
D H Sampson
The judgment handed down in the case of Margalit v Standard Bank of SA Ltd. (883/2011) [2012] ZASCA 208 should be a wake up call to all conveyancers.
The judge held as follows in para 26:
“To avoid causing such harm, conveyancers should therefore be fastidious in their work and take great care in the preparation of their documents. Not only is that no more than common sense, but it is the inevitable consequence of the obligations imposed by section 15(A) of the Act as read with regulation 44, both of which oblige conveyancers to accept responsibility for the correctness of the facts stated in the deeds or documents prepared by them in connection with any application they file in the deeds office.”
The judge went further in para 29 by averring as follows:
“As I have said, a conveyancer should fastidiously examine all relevant documents. That was clearly not done by the second respondent. The standard of care it exercised fell well short of what is expected of a reasonable conveyancer, and I have no hesitation in finding that the delay caused by the rejection on 22 May 2008 was due to negligence on the part of the second respondent.”
Given the referred to two extracts from the judgment, it is obvious that a conveyancer who does not apply the necessary care and diligence when preparing deeds and documents can be held delictually liable.
All conveyancers are urged to read the full judgment and not crit the judgment on the merits thereof, but to heed what the judge said about the care and diligence a conveyancer must apply when drafting deeds and documents.
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