29 Jan 2015

Conveyancing & Property Update, How well should you know your Conveyancer?

by Leza Kotze, Partner, Johannesburg,
Practice Area(s): Property & Conveyancing |

It is an all-too-common scenario. Paul sells his immovable property to Sue. The contract of sale requires Sue to pay a deposit to Paul's appointed conveyancer, where it will be held in trust pending transfer to the property to her.

But what are the consequences for both Paul and Sue if the conveyancer misappropriates the deposit amount before the transfer can be effected? Is Sue entitled to claim transfer of the property? Where to start with legal proceedings to retrieve the money and whose responsibility is it to do so?

The Supreme Court recently, in Minister of Agriculture and Land Affairs v and Another v De Klerk and others (2014) 1 SA 158 (SCA), concluded that any payment to the conveyancer by the purchaser is not the same as payment made to the seller. It thus does not operate to discharge the purchaser's obligations to pay the purchase price to the seller. So any performance made by the purchaser in terms of the contract of sale becomes null and void, as if it never happened. For the purchaser to be discharged of his obligations to pay, the contract of sale must specifically confer authority on the conveyancer to represent the seller as agent in the acceptance of the purchase price.

There is recourse for Sue: The Attorneys Fidelity Fund. Section 26 of the Attorneys Act 53 of 1979 provides that the Fidelity Fund shall reimburse persons who suffer any pecuniary loss as a result of theft committed by any practising practitioner of any money entrusted on behalf of the person who suffered. Notice of the claim should be given to the Council of the Law Society in which the practitioner practices within three months after the claimant became aware of the theft, by way of an affidavit. Any proof required by the Fund, such as a copy of the claimants' ledger accounts, paid cheques and correspondence, should also be given within six months from the date a demand is given for such proof.

However, the Fund is a fund of last resort and if it appears that the stolen money can be recovered from another source, the Fund's Board of Control will require the claimant, at his/her own expense, to first exhaust all other available legal remedies against the conveyancer, being the person liable in law. The Fund further has a discretion, in terms of Section 45(bA) of The Attorneys Act, to pay only a portion of the legal costs incurred in pursuing such legal remedies. Such reimbursement will be based on again, whether the Fund is of the opinion that the claimant's claim is valid, worthwhile and whether they directed the claimant to first institute legal proceedings against the conveyancer.

Sue will therefore have to instruct an attorney of her choice to act against the conveyancer and issue a formal letter of demand before, if no response is received, serving a summons on the conveyancer and commencing with normal litigation proceedings to retrieve the stolen amount.  The Fund will further require Sue to proceed against the conveyancer to the point of execution, during which the Sheriff of the Court may either attach assets that may be sold in execution, or issue a nulla bona return in the event of the conveyancer not owning any assets capable of attachment. Pending resolution Sue will be obliged to ensure that the legal costs incurred by her Attorney is being paid and in addition Paul may elect to claim payment of the deposit amount from her, since her previous payment did not discharge her obligations to him in terms of the contract of sale.

It is only at this point that the Fund will do their own investigation of the matter with the evidence and proof the claimant provided them and based on their findings, The Fund can either reject the claim, pay out the claim or pay out a portion of the claim. Rejection of a claim will be due to their findings failing to support the claim of theft by the claimant. However pending this decision Sue may very well find herself frustrated by a costly and protracted litigation process.