Court ruling: attorney declared negligent in dealing with client funds

In the recently decided 2019 case of Jurgens and another v Volschenk, the Eastern Cape Division of the High Court made it clear that the utmost care must be taken by attorneys when handling trust money or dealing with a client’s finances, and that failing to do so will have severe consequences.

Buying Property On Auction | Property Blog Articles

The facts of the case

Ben and Wendy Jurgens sold their property located in Uitenhage in the Eastern Cape. To effect the transfer, they enlisted the help of Lynette Volschenk, a conveyancing attorney who previously handled a transfer for them during October 2017.

The parties intended to emigrate to the United States of America after finalisation of the transaction. However, they left prior to registration of the transfer. After the Jurgens emigrated, they received an email from Lynette’s secretary, Natasha, advising them that the transfer papers had been lodged at the Deeds Office.

This email correspondence was hacked and the Jurgens subsequently received a fraudulent email from the hackers on 14 December 2017. This email, which was made to look like it came from Natasha, requested Mr Jurgens to supply proof of his Standard Bank account. Jurgens did as requested, however, he noticed that the email was from an address he did not recognise and copied in the original email address he had for Natasha.

On 15 December, Mr Jurgens enquired as to when he could expect payment and Natasha advised that the matter had not come for registration. The fraudulent email address was also included in this correspondence and the hackers followed up with Jurgens, directing him to use their email address moving forward as ‘their offices would be closed for the December holidays’.

In addition, on 15 December, Natasha received an email from the hackers purporting to be Jurgens, informing her the money from this transaction should be deposited into an ABSA account.

On 21 December, Jurgens received proof of payment and the registration letter. However, on 26 December, he contacted Natasha and Lynette via email to inform them that he had not received the money. 

At this point, Jurgens was advised that the emails had been hacked and that the proceeds of the sale amounting to R967 510.53 had been paid into the ABSA account provided by the hackers. The bulk of the funds had already been withdrawn, and a balance of only R65 584.21 remained.

Mr and Mrs Jurgens claimed that this outcome was due to Lynette Volschenk’s negligence. The issue to be decided was therefore whether the respondent acted negligently when she paid the amount to the wrong person.

The court’s decision

There are various court cases that deal with the issue of negligence that offer precedent in matters such as this, including:

  • Lillicrap, Wassenaar and Partners v Pilkington Brothers (SA) (Pty) Ltd 1985 (1) SA 475 (A);
  • Margalit v Standard Bank of SA Ltd 2013 (2) SA 466 (SCA) para.23;
  • Holtzhausen v Absa Bank Ltd 2008 (5) SA 630 (SCA) para. 6; and
  • Bruce NO v Berman 1963(3) SA 21 (T).

The court in this case applied the above mentioned case law and rule of law in the judgement.

The highest possible degree of good faith is expected from an attorney, requiring vigorous accuracy in their work. In Lillicrap, the Honourable Judge Grosskopf highlighted the contractual duty to perform professional work with due diligence. He also held that the damages claimed in a case of negligence should place the purchaser in the position they would have been in had the contract been properly performed. 

In previous cases, it was held that a conveyancer may make mistakes and it must be shown that the conveyancer’s mistake resulted from a failure to exercise the degree of care and skill of a reasonable conveyancer in that same position. Depending on the unique set of facts of a case, if the conveyancer is found to have not taken sufficient care, he may be held liable.

Taking into account this reasonable person test, the court held that Mr and Mrs Jurgens expected their conveyancer, Lynette Volschenk, to execute the necessary diligence, skill and care as required from a reasonable attorney.

Ultimately, the court held the sudden change in banking details should have raised concerns, particularly since the ABSA statement did not reflect the names and addresses of the account holder and while the parties to this transaction resided in the Eastern Cape, the majority of the transactions took place in Gauteng. Therefore the conveyancer was seen by the court to have a duty to verify the information supplied. 

The court declared that Lynette Volschenk was liable in her capacity as attorney, and that she could not pass responsibility to her secretary. She owed a duty to her clients, and as a result, was  ordered to pay R967 510.53 plus interest of 10.25 % on the amount.

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Court ruling: attorney declared negligent in dealing with client funds

In the recently decided 2019 case of Jurgens and another v Volschenk, the Eastern Cape Division of the High Court made it clear that the utmost care must be taken by attorneys when handling trust money or dealing with a client’s finances, and that failing to do so will have severe consequences.

Buying Property On Auction | Property Blog Articles

The facts of the case

Ben and Wendy Jurgens sold their property located in Uitenhage in the Eastern Cape. To effect the transfer, they enlisted the help of Lynette Volschenk, a conveyancing attorney who previously handled a transfer for them during October 2017.

The parties intended to emigrate to the United States of America after finalisation of the transaction. However, they left prior to registration of the transfer. After the Jurgens emigrated, they received an email from Lynette’s secretary, Natasha, advising them that the transfer papers had been lodged at the Deeds Office.

This email correspondence was hacked and the Jurgens subsequently received a fraudulent email from the hackers on 14 December 2017. This email, which was made to look like it came from Natasha, requested Mr Jurgens to supply proof of his Standard Bank account. Jurgens did as requested, however, he noticed that the email was from an address he did not recognise and copied in the original email address he had for Natasha.

On 15 December, Mr Jurgens enquired as to when he could expect payment and Natasha advised that the matter had not come for registration. The fraudulent email address was also included in this correspondence and the hackers followed up with Jurgens, directing him to use their email address moving forward as ‘their offices would be closed for the December holidays’.

In addition, on 15 December, Natasha received an email from the hackers purporting to be Jurgens, informing her the money from this transaction should be deposited into an ABSA account.

On 21 December, Jurgens received proof of payment and the registration letter. However, on 26 December, he contacted Natasha and Lynette via email to inform them that he had not received the money. 

At this point, Jurgens was advised that the emails had been hacked and that the proceeds of the sale amounting to R967 510.53 had been paid into the ABSA account provided by the hackers. The bulk of the funds had already been withdrawn, and a balance of only R65 584.21 remained.

Mr and Mrs Jurgens claimed that this outcome was due to Lynette Volschenk’s negligence. The issue to be decided was therefore whether the respondent acted negligently when she paid the amount to the wrong person.

The court’s decision

There are various court cases that deal with the issue of negligence that offer precedent in matters such as this, including:

  • Lillicrap, Wassenaar and Partners v Pilkington Brothers (SA) (Pty) Ltd 1985 (1) SA 475 (A);
  • Margalit v Standard Bank of SA Ltd 2013 (2) SA 466 (SCA) para.23;
  • Holtzhausen v Absa Bank Ltd 2008 (5) SA 630 (SCA) para. 6; and
  • Bruce NO v Berman 1963(3) SA 21 (T).

The court in this case applied the above mentioned case law and rule of law in the judgement.

The highest possible degree of good faith is expected from an attorney, requiring vigorous accuracy in their work. In Lillicrap, the Honourable Judge Grosskopf highlighted the contractual duty to perform professional work with due diligence. He also held that the damages claimed in a case of negligence should place the purchaser in the position they would have been in had the contract been properly performed. 

In previous cases, it was held that a conveyancer may make mistakes and it must be shown that the conveyancer’s mistake resulted from a failure to exercise the degree of care and skill of a reasonable conveyancer in that same position. Depending on the unique set of facts of a case, if the conveyancer is found to have not taken sufficient care, he may be held liable.

Taking into account this reasonable person test, the court held that Mr and Mrs Jurgens expected their conveyancer, Lynette Volschenk, to execute the necessary diligence, skill and care as required from a reasonable attorney.

Ultimately, the court held the sudden change in banking details should have raised concerns, particularly since the ABSA statement did not reflect the names and addresses of the account holder and while the parties to this transaction resided in the Eastern Cape, the majority of the transactions took place in Gauteng. Therefore the conveyancer was seen by the court to have a duty to verify the information supplied. 

The court declared that Lynette Volschenk was liable in her capacity as attorney, and that she could not pass responsibility to her secretary. She owed a duty to her clients, and as a result, was  ordered to pay R967 510.53 plus interest of 10.25 % on the amount.

Follow Snymans on Facebook for more legal information, tips and news about property.