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Lessons from Margalit

23 July 2013

Routledge Modise

Conveyancers should "be fastidious in their work" that is "no more than common sense" .That's what the Supreme Court of Appeal said when it handed down its decision in Margalit v Standard Bank of South Africa Ltd (883/2011) ZASCA 208 (3 December 2012).

This decision was an appeal from the South Gauteng High Court. The Appellant sought to claim damages in respect of the net price (R2.9m) of certain immovable property he sold. Damages were claimed on the allegation that it was the unprofessional conduct of the Respondents in this matter that caused the Appellant to suffer harm and resulted in breach of a contract.

The facts in the SCA, as deposed of by Leach JA, were: The Appellant sold certain immovable property. At the time of the sale, the property was held under two mortgage bonds on behalf of Standard Bank, the first Respondent. This meant transfer could not be effected until consent to cancel these bonds was received from Standard Bank. Also, no transfer could be registered without a rates and taxes clearance certificate being issued by the relevant local authority (City of Johannesburg).

The Appellant subsequently appointed his attorneys as transferring attorneys to attend to the necessary to allow transfer to the purchaser. The transferring attorney's first step was to apply for the clearance certificate immediately after the property was sold. This was done in May 2007. The clearance certificate, however, was only received on 30 April 2008, but this the Appellant did not attribute as the fault of the Respondents.

It was common cause that the purchaser too wanted to mortgage the property as security for the loan he had negotiated with Nedbank. This meant Nedbank had to provide a guarantee to pay the outstanding amount secured by the existing mortgage bonds in order to obtain Standard Bank's consent to cancellation.

It was evident, therefore, that three transactions had to take place simultaneously. These were transfer of ownership, cancellation of existing bonds and registration of the mortgage bond of the new bondholder over the property.

The second Respondent, representing Standard Bank, was charged with ensuring that the bonds were cancelled upon receipt of the guarantees from Nedbank. A request was made by the appellant's attorney on 11 June 2007, for the details of Standard Bank's guarantee requirements. The second respondent, acting on behalf of Standard Bank, replied to this request on 14 September 2007, setting out the requirements and further stating that only one bond would be cancelled.

On the facts it would seem that at this time the second respondent had come to possess a copy of the title deed of the property, which in fact only showed an endorsement regarding one bond and not two. It would further seem that the various parties proceeded on this misrepresentation that there was only one bond over the property on behalf of Standard Bank.

On 1 July 2007, Nedbank issued a guarantee to Standard Bank for the amount outstanding on the mortgage bond. This, however, did not move the proceedings as the transfer remained in limbo while the parties awaited the clearance certificate from the local authority, which finally arrived on 30 April 2008. However, it appeared that Standard Bank had lost both its copies of the title deed to the property and the mortgage bonds. This could be rectified by the lodgment of a Regulation 68(1) application and affidavit in terms of the Deeds Registries Act (47 of 1937) for certified copies of lost documents, which had to be prepared by the second Respondent and lodged simultaneously with the other three transactions.

On 13 May 2008 the transactions were "linked' and lodged at the Pretoria deeds office. En route, an examiner at the deeds office ascertained that Standard Bank had not given consent for the cancellation of the second bond and, therefore, rejected the hatch of documents.

Towards the end of May 2008 consent from Standard Bank was obtained by the second respondent and, with the signed Regulation 68(1) application and affidavit, the documents were once again lodged. Almost immediately the batch was again rejected because of the failure by the purchaser's bank (Nedbank) to lodge its documents.

This delay was held to be inconsequential. However, upon further lodgment, a further delay was experienced due to inconsistency in the practices of the different deeds offices (Johannesburg and Pretoria) when registering a transfer. For example, at the Johannesburg deeds office an attorney, acting on behalf of a bondholder, could sign the Regulation 68(1) application and affidavit In Pretoria, however, only a representative of the bondholder had such power, not the attorney.

It came to light that the Regulation 68(1) application and affidavit had been prepared in terms of the Johannesburg practice and not the Pretoria practice which, by the time of the transaction, had already become a national uniform practice in terms of RCR 20 of 2007. This, consequently, led to the batch being rejected again.

The result of the accumulated delays was that transfer was delayed from 29 May 2008 (the projected date of registration had everything gone without delay) to July 2008, when the transfer was eventually registered.

The appellant contended that the second respondent's negligent and unprofessional conduct was the cause of the delay and had resulted in Standard Bank not only breaching its contract but had also led to the second respondent being liable for delictual damages.

At the court a quo, the Magistrates Court, it was held that the Respondents were liable for damages of the sum of R42 713.42 attributable to the second Respondent's unprofessional conduct. This was the amount agreed on, by the Respondents, in the event that the Applicant was successful.

The Respondents appealed the decision of the court a quoto the South Gauteng High Court. The High Court found in favour of the Respondents and set aside the order by the court a quand absolved the matter from the instance.

The High Court found that the Respondent (Appellant at the SCA) had failed to show he was owed a duty of care by the attorney in cancelling the bonds and the Respondent's failure to provide a guarantee availed the Appellant (Respondent at the SCA) the contractual remedy of exceptio non adempletiand therefore no extension of a delictual remedy could be awarded.

 At the SCA, Leach JA held that the reasoning of the High Court was incorrect because the exceptio non adimpleti contracts is only available when the other party sought to delay or withhold performance.

In these circumstances neither Respondent sought to delay or withhold performance by reason of any failure of the Appellant to perform. Everyone did their part and therefore the exceptio was unavailable to the Respondents. The crucial issue, the appeal judge considered, was negligence and not wrongfulness on the part of the second Respondent; counsel for the Respondents conceded that should the court find the delays in transfer were due to the second Respondent's negligence, both respondents should he held liable for the damages.

The court noted that not every mistake is to be equated with negligence and thus "in a claim against a conveyancer based on negligence it must he 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 ".

The judge held that any mistake by a conveyancer that resulted in delaying a transaction at the deeds office can lead to financial loss to the conveyancer's clients. It makes common sense, therefore, that conveyancers should he fastidious in their work and take great care when preparing documents.

The contention that the second Respondent could not have known of the second bond endorsement did not hold water as the Appeal Court held that a conveyancer should fastidiously examine all relevant documents, which the second Respondent did not do in this matter. The court therefore found that the second respondent's conduct fell short of what is expected of a reasonable conveyancer and thus the delay was due to the negligence of the second Respondent.

On the issue of the incorrectly attested to Regulation 68(1) application and affidavit, the court held that the necessary inference to be drawn was that the second Respondent knew or should have known of the uniform practice of correctly attesting to such affidavits by the time it was making the application. The failure by the second Respondent to examine the documents and adhere to the correct practice caused a further rejection and delayed the process even more.

The court, in conclusion, held that the second respondent's conduct fell short of the high standard of care expected of a prudent practitioner and upheld the appeal with costs.

This case highlights the fact that legal practitioners, in their capacity as conveyancers, owe an onerous standard of care and prudence to their clients.

The team

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