The deal collapsed – is the attorney to blame?

The case of Nienaber N.O. and van den Berg (the plaintiffs) versus Nelson and Kitching Attorneys (the defendants) highlights the criteria of the duty of care a conveyancer should be aware of when providing services to clients. In this case, the plaintiffs instituted action alleging that the defendants owed them a duty of care as conveyancers and acted negligently and in breach of such duty. Let’s take a closer look.

The process to approval for extending a Sectional Title Units

The plaintiffs entered into a series of separate agreements with a developer named Headline Trading 124 CC trading as Status Homes. The agreements were for the sale of multiple adjacent immovable properties which were the plaintiffs’ primary places of residence. In terms of the agreements, each plaintiff would sell their property to the developer for R1,4 million, whereafter the properties would be consolidated, and all buildings demolished for the construction of a new sectional title development. In addition to the above purchase price, the developer assumed liability for the costs of cancelling any existing bonds and the payment of any rental costs due on behalf of the plaintiffs as they awaited completion of the new development. At the time of this agreement, the property market had surged.

One of the defendants, a conveyancer, was appointed to prepare the agreements and all transfer-related documentation.

During this time, the property boom came to an end and the market crashed. As a result, the developer did not receive the funds (from pre-sales and sales) needed to clear the plaintiffs’ bonds and other related costs. The developer was also unable to make payments as agreed. As a result, the plaintiffs found themselves homeless and in financial ruin. The banks called on their security as a first charge, which left the plaintiffs without any substantial claim against the developer. 

The plaintiffs then instituted legal action against the conveyancers. They alleged that the conveyancers owed them a duty of care to guide against the risk and loss suffered and, as a consequence, the conveyancer had acted negligently and in breach of their professional duty.

The court therefore had to determine the duty of care of a conveyancer in the performance of their professional functions. The court held that the duty of care does not include wrongfulness and negligence, as these two elements have different features. The court indicated that it had to first determine the presence of any wrongfulness on the part of the conveyancer. In this case, the plaintiffs’ particulars of claim made no enquiry into wrongfulness and the court found no wrongfulness on the part of the conveyancer.

When the enquiry into negligence was made, a special witness with experience as a conveyancer was called upon. This witness testified that “the deed of sale (agreement) was lacking in providing proper security and the suretyship clause obtained from the developer was inadequate”. The court held that the expert testimony lacked credibility as the expert was not aware that the plaintiffs had instructed one of the defendants in drawing up the agreement between themselves and the developer. These instructions were clear as to what was to be included in the contract and the security mention was not included at the insistence of the plaintiffs after being advised to do so. 

The court held that a duty of care cannot be generic or all-encompassing and that it is fact specific, and that the facts informing that duty must, of necessity, be pleaded in regard to the specific case. 

The criteria by which conveyancers are evaluated was set out in Margalit v Standard Bank of South Africa, where the Supreme Court of Appeals stated that:

 “A conveyancer is of course ‘an attorney who has specialised in the preparation of deeds and documents which by law or custom are registrable in a deeds office and who is permitted to do so after practical examination and admission…’ Like any other professional, a conveyancer may make mistakes. But not every mistake is 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 per the reasonable person test, a professional in the position of a conveyancer is also susceptible to making errors – however, those errors must be reasonable.

Having set out the criteria of the duty of care of a conveyancer, the court found that the defendant had dispensed with all his legally bound duties regarding the transfer of the properties being sold. The court also indicated that nothing emerged that showed that any other reasonable conveyancer could have prevented the plaintiffs’ loss.

The court went on to express that, in such an enquiry, it is the plaintiff who bears the onus to prove the alleged wrongfulness on the part of the conveyancer.

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The deal collapsed – is the attorney to blame?

The case of Nienaber N.O. and van den Berg (the plaintiffs) versus Nelson and Kitching Attorneys (the defendants) highlights the criteria of the duty of care a conveyancer should be aware of when providing services to clients. In this case, the plaintiffs instituted action alleging that the defendants owed them a duty of care as conveyancers and acted negligently and in breach of such duty. Let’s take a closer look.

The process to approval for extending a Sectional Title Units

The plaintiffs entered into a series of separate agreements with a developer named Headline Trading 124 CC trading as Status Homes. The agreements were for the sale of multiple adjacent immovable properties which were the plaintiffs’ primary places of residence. In terms of the agreements, each plaintiff would sell their property to the developer for R1,4 million, whereafter the properties would be consolidated, and all buildings demolished for the construction of a new sectional title development. In addition to the above purchase price, the developer assumed liability for the costs of cancelling any existing bonds and the payment of any rental costs due on behalf of the plaintiffs as they awaited completion of the new development. At the time of this agreement, the property market had surged.

One of the defendants, a conveyancer, was appointed to prepare the agreements and all transfer-related documentation.

During this time, the property boom came to an end and the market crashed. As a result, the developer did not receive the funds (from pre-sales and sales) needed to clear the plaintiffs’ bonds and other related costs. The developer was also unable to make payments as agreed. As a result, the plaintiffs found themselves homeless and in financial ruin. The banks called on their security as a first charge, which left the plaintiffs without any substantial claim against the developer. 

The plaintiffs then instituted legal action against the conveyancers. They alleged that the conveyancers owed them a duty of care to guide against the risk and loss suffered and, as a consequence, the conveyancer had acted negligently and in breach of their professional duty.

The court therefore had to determine the duty of care of a conveyancer in the performance of their professional functions. The court held that the duty of care does not include wrongfulness and negligence, as these two elements have different features. The court indicated that it had to first determine the presence of any wrongfulness on the part of the conveyancer. In this case, the plaintiffs’ particulars of claim made no enquiry into wrongfulness and the court found no wrongfulness on the part of the conveyancer.

When the enquiry into negligence was made, a special witness with experience as a conveyancer was called upon. This witness testified that “the deed of sale (agreement) was lacking in providing proper security and the suretyship clause obtained from the developer was inadequate”. The court held that the expert testimony lacked credibility as the expert was not aware that the plaintiffs had instructed one of the defendants in drawing up the agreement between themselves and the developer. These instructions were clear as to what was to be included in the contract and the security mention was not included at the insistence of the plaintiffs after being advised to do so. 

The court held that a duty of care cannot be generic or all-encompassing and that it is fact specific, and that the facts informing that duty must, of necessity, be pleaded in regard to the specific case. 

The criteria by which conveyancers are evaluated was set out in Margalit v Standard Bank of South Africa, where the Supreme Court of Appeals stated that:

 “A conveyancer is of course ‘an attorney who has specialised in the preparation of deeds and documents which by law or custom are registrable in a deeds office and who is permitted to do so after practical examination and admission…’ Like any other professional, a conveyancer may make mistakes. But not every mistake is 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 per the reasonable person test, a professional in the position of a conveyancer is also susceptible to making errors – however, those errors must be reasonable.

Having set out the criteria of the duty of care of a conveyancer, the court found that the defendant had dispensed with all his legally bound duties regarding the transfer of the properties being sold. The court also indicated that nothing emerged that showed that any other reasonable conveyancer could have prevented the plaintiffs’ loss.

The court went on to express that, in such an enquiry, it is the plaintiff who bears the onus to prove the alleged wrongfulness on the part of the conveyancer.

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