Further discussion of Royal Anthem Investments 129 (Pty) Ltd v Yuen Fan Lau and Shun Cheng Liang (941/2012 [2014] ZASCA 19 (26 March 2014) (for background see the original Royal Anthem Investments article which appeared in the Special Policy Edition of the Risk Alert Bulletin No 3/2014).
As a result of the Royal Anthem Investments’ judgment, conveyancers are placed in a very precarious position where there is a dispute between a seller and a purchaser regarding the validity/interpretation of a sale agreement. When faced with a claim like this, consideration should be given to section 1 of the Prescribed Rate of Interest Act (PRIA) which reads as follows:
“If a debt bears interest and the rate at which the interest is to be calculated is not governed by any other law or by an agreement or a trade custom or in any other manner, such interest shall be calculated at the rate prescribed under subsection (2) as at the time when such interest begins to run, unless a court of law, on the ground of special circumstances relating to the debt, orders otherwise.”
The Royal Anthem sale agreement clearly stipulated that the deposits had to be invested in terms of section 78(2A) of the Attorneys Act and therefore the interest was governed by an agreement. It could also be argued that it is a trade custom that funds paid to a conveyancer and held by a conveyancer in trust will be invested by the conveyancer in an interest bearing account and the interest thus earned is for the benefit of the person entitled to the capital at the time when the interest was earned. Unfortunately no reasoning was given by the Court as to why the purchaser would be entitled to mora interest. Perhaps there is a general assumption that debts normally bear interest at the mora rate (15.5%) calculated from due date to date of payment.
It might also be prudent for a conveyancer, faced with a similar claim, to institute interpleader proceedings in terms of High Court Rule 58 and Section 69 read with rule 44 in the Magistrate’s Court. In terms of these interpleader proceedings any funds held in trust by the conveyancer will then be paid to the Registrar, taking the risk away from the conveyancer.
Ken Mustard
Mc Clung - Mustard
Reader Comments:
With all due respect to the court I think the order against the conveyancer was a glaring mistake. If I remember the action had been withdrawn against the conveyancer and the conveyancer was accordingly not before the court. To then make an order against the conveyancer without hearing his side of the story was neglecting the fundamental principle of justice that both sides of the case should be heard. I am sure there are many arguments that could be put forward on behalf of the conveyancer who was in fact just a stakeholder.
The order for mora interest should have been made against the seller in the transaction and the interest actually earned and paid over to the purchaser should be deducted from the mora interest. That would be justice.
Please note that the mora rate is now 9% and no longer 15.5% (as from 1 August 2014).
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