Nelson Attorneys v Smit N.O and Others (532/2024) [2025] ZASCA 162 (24 October 2025)

Case Note

Nelson Attorneys v Smit N O & Others (532/2024) [2025] ZASCA 162 (24 October 2025)

Supreme Court of Appeal of South Africa. Coram: Mbatha ADP, Mothle JA, Kgoele JA, Keightley JA (author), and Henney AJA. Heard on 28 August 2025; handed down electronically at 11h00 on 24 October 2025. Case number: 532/2024.

The appeal arose from the Eastern Cape Division of the High Court, Makhanda (Mjali J, Norman J and Govindjee J) sitting as a full court. The SCA upheld the appeal with costs and substituted the full court’s order with one dismissing the respondents’ appeal to that court, also with costs, including the costs of two counsel where employed.

Reportability

This judgment is reportable because it delivers a significant and clarifying exposition of the distinction between wrongfulness and negligence in claims for pure economic loss arising from professional services, particularly in the conveyancing context. The Supreme Court of Appeal highlights that the admission of a “duty of care” in pleadings goes to fault (negligence), not to wrongfulness, and that wrongfulness in pure economic loss must be independently pleaded and proved by reference to legal and public policy considerations.

The court reaffirms and applies core principles from Country Cloud, Two Oceans Aquarium, Fourway Haulage and Telematrix to the conveyancing setting, emphasizing the “vulnerability to risk” criterion as a limiting consideration when courts are asked to extend Aquilian liability. On the pleaded facts, the respondents were not vulnerable because they could reasonably have protected themselves contractually and, at multiple junctures, elected to persist with a high‑risk, high‑return development scheme.

The judgment is also important because it underscores that the causation enquiry remains indispensable. Even where negligence is alleged against a conveyancer, plaintiffs must establish both factual and legal causation. The court demonstrates that market failures, bank funding dynamics, and external economic downturns may constitute superseding causes that break the causal chain. As such, this case provides doctrinal clarity for practitioners litigating professional negligence and economic loss claims in property development transactions.

Cases Cited

Country Cloud Trading CC v MEC, Department of Infrastructure Development, Gauteng [2014] ZACC 28; 2015 (1) SA 1 (CC)

Telematrix (Pty) Ltd t/a Matrix Vehicle Tracking v Advertising Standards Authority SA 2006 (1) SA 461 (SCA)

Trustees, Two Oceans Aquarium Trust v Kantey & Templer (Pty) Ltd 2006 (3) SA 138 (SCA)

Fourway Haulage SA (Pty) Ltd v South African National Roads Agency Ltd 2009 (2) SA 150 (SCA)

Minister of Safety and Security v Van Duivenboden 2002 (6) SA 431 (SCA)

Hawekwa Youth Camp v Byrne [2009] ZASCA 156; 2010 (6) SA 83 (SCA)

Margalit v Standard Bank Ltd and Another [2012] ZASCA 208; 2013 (2) SA 466 (SCA)

PriceWaterhouseCoopers Inc and Others v National Potato Co‑Operative Ltd and Another [2015] ZASCA 2; 2015 (2) SA 403 (SCA); [2015] 2 All SA 403

Mashongwa v Passenger Rail Agency of South Africa [2015] ZACC 36; 2016 (3) SA 528 (CC)

Ultramares Corporation v Touche 174 NE 441 (NY 1931)

Legislation Cited

Deeds Registries Act 47 of 1937, section 15A

The Constitution of the Republic of South Africa, 1996 (as informing the public policy framework for wrongfulness)

Rules of Court Cited

No specific rules of court were expressly cited in the judgment.

HEADNOTE

Summary

The case concerned whether a firm of attorneys and conveyancers could be held delictually liable for pure economic loss suffered by sellers in a failed residential development scheme. The sellers had agreed to transfer their properties to a developer in exchange for future transfer of newly constructed sectional title units instead of a cash purchase price. When the development collapsed amid a property market downturn and bank funding restrictions, the sellers sued the conveyancer in delict for the value of the lost contractual bargain.

At trial, the high court dismissed the claim. The full court reversed, holding that the conveyancer had admitted a legal duty and was negligent, and awarded damages. The Supreme Court of Appeal upheld the conveyancer’s appeal. It held that an admission of a “duty of care” addresses negligence, not wrongfulness, and therefore wrongfulness remained to be pleaded and proved by the plaintiffs, which they failed to do.

The SCA further held that negligence and causation were not established. The plaintiffs were not “vulnerable to risk,” had knowingly accepted a high‑risk transaction for high returns, and had opportunities to protect themselves contractually. The collapse of the development was driven by external factors outside the conveyancer’s control, breaking the chain of causation. The appeal was accordingly upheld with costs.

Key Issues

A central issue was whether the conveyancer’s plea admitting a “duty of care” amounted to an admission of the delictual element of wrongfulness. The SCA held it did not. Wrongfulness, particularly in pure economic loss, is a separate element that requires a legal‑policy‑based justification for imposing liability and cannot be inferred merely from an admission relating to negligence.

The court also had to determine whether public and legal policy justified extending Aquilian liability to a conveyancer for the plaintiffs’ purely financial loss where the core risk materialised from a failed development, and whether the plaintiffs were “vulnerable” in the sense relevant to wrongfulness. The SCA found that the plaintiffs were willing risk‑takers who could have protected their position but chose not to.

Finally, the SCA addressed whether negligence and causation were made out. It concluded that the expert evidence on negligence was unpersuasive and premised on incomplete facts, and that factual and legal causation were absent because the failure of the development flowed from market conditions and funding constraints, not from the conveyancer’s conduct.

Held

The admission in the plea that the conveyancer owed a “duty of care” went to the fault element (negligence) and did not constitute an admission of wrongfulness. Wrongfulness had to be pleaded and established by policy considerations justifying the imposition of delictual liability for pure economic loss. The plaintiffs failed to do so.

On the merits, wrongfulness was not established. The transaction was a high‑risk, high‑reward arrangement devised and pursued by the plaintiffs with awareness of its risks. The conveyancer did not cause the development’s collapse, and legal policy did not warrant extending liability in the circumstances, particularly given the plaintiffs’ lack of vulnerability to risk.

Even if wrongfulness were assumed, negligence was not proved on the evidence, and causation failed. The external market downturn, pre‑sale shortfalls and the bank’s refusal to allow further drawdowns were intervening causes. The SCA set aside the full court’s order and upheld the appeal with costs, substituting an order dismissing the plaintiffs’ appeal to the full court.

THE FACTS

In the mid‑2000s the respondents (the estate of Mrs Kelbrick and Mr and Mrs van den Berg) owned adjoining properties in Westering, Port Elizabeth (Gqeberha). Inspired by another site, the Van den Bergs engaged a developer, Headline Trading 124 CC t/a Status Homes Developers, controlled by Mr Lamour, to pursue a combined development across three erven, including those of the respondents and a third owner, Mr Jonker. The proposal envisaged consolidation of the erven and a sectional title townhouse scheme of about 16–20 units.

The essential bargain was unconventional. The owners would transfer their erven to the developer for consolidation and, in lieu of a cash purchase price, would receive personal rights to demand transfer of specified sectional title units to be built in the future. For the Van den Bergs, the agreed consideration equated to two new units initially valued at approximately R700 000 each (R1.4 million total), plus cancellation of their existing bond on transfer; they would contribute R300 000 if the chosen units exceeded that value. The deed of sale provided that transfer to the developer would occur “as soon as possible,” that approvals including a site development plan were conditions precedent, and that Mr Lamour would bind himself as surety and co‑principal debtor for the developer’s obligations.

Despite concerns about slow progress and emails expressing dissatisfaction in 2005–2007, the respondents signed the deeds of sale in September 2006. Transfer and consolidation were registered in July 2007 and a large development bond was registered in favour of Standard Bank, which also took a suretyship from Lamour. The removal of restrictive title conditions was granted around August 2008. Meanwhile, the property market softened. Although some site works commenced in 2008, Standard Bank refused further drawdowns in early 2009 due to insufficient pre‑sales, and construction ceased. Status was liquidated in 2010 and Lamour was sequestrated.

The respondents sued Status and Lamour in 2008 for breach, claiming the purchase consideration and alternative accommodation rentals, later obtaining summary judgment only for rentals. After a separate action by Jonker against, inter alia, Nelson Attorneys was settled, the respondents issued summons in 2011 against Nelson Attorneys (the appellant), alleging delictual liability for pure economic loss arising from negligent advice and conveyancing. The trial court dismissed their claim. The full court reversed and awarded damages. The present appeal to the SCA followed with special leave.

THE ISSUES

The first issue was whether, on the pleadings, wrongfulness had been admitted through the appellant’s admission of paragraph 23 of the particulars of claim, which averred a “duty of care” arising from drafting the deeds of sale and acting as conveyancer. The SCA had to decide whether this constituted an admission of the delictual element of wrongfulness, or merely an admission going to negligence.

If wrongfulness was not admitted, the court had to determine whether the respondents established wrongfulness for purposes of a pure economic loss claim, namely whether public or legal policy considerations justified imposing liability on the conveyancer for the lost contractual bargain with the developer. This included consideration of the “vulnerability to risk” criterion.

If wrongfulness were established or assumed, the court further had to decide whether negligence and causation were made out. That turned on the adequacy of the expert evidence, whether reasonable conveyancing practice required further security or a different transfer sequence, and whether any negligence was factually and legally causative of the respondents’ loss in light of the market downturn and bank funding decisions.

ANALYSIS

The SCA drew a sharp and deliberate distinction between wrongfulness and negligence, emphasising that the elements must not be conflated, especially in pure economic loss claims. Wrongfulness is concerned with whether, as a matter of public and legal policy consistent with constitutional norms, it is reasonable to impose liability for negligent conduct causing pure economic loss; negligence is concerned with the reasonableness of the defendant’s conduct. The admission in paragraph 23 that the appellant owed a “duty of care” was an admission tied to negligence, not an admission that the conduct was wrongful.

On wrongfulness, the court reaffirmed that there is no general right not to suffer pure economic loss and that liability requires policy reasons to impose a legal duty not to act negligently. The court identified the “vulnerability to risk” inquiry as key. Where a plaintiff could reasonably have taken steps to protect against the loss, the case for extending delictual liability diminishes. The respondents had multiple opportunities to protect themselves: they contemplated alternative developers, threatened to seek advice but did not do so for months, and consciously elected to proceed with a high‑risk, high‑return structure in a buoyant market. They accepted a personal right in lieu of a guaranteed cash price and agreed to an early transfer and consolidation “as soon as possible,” with no deposit or bank guarantee.

The court found no persuasive policy basis to extend liability to the conveyancer on these facts. The real drivers of the loss were the downturn in the property market, consequent pre‑sale failures, and the bank’s refusal to permit further drawdowns under the development loan—factors outside the conveyancer’s control. Imposing liability would effectively require a conveyancer to dissuade sophisticated sellers from a commercially motivated, consciously risk‑laden transaction forged before the conveyancer’s involvement, which the court held would be neither reasonable nor doctrinally sound.

On negligence, the court considered the expert evidence that suggested the conveyancer should have required more robust security (e.g., a second bond) and should have delayed transfer until after all approvals. The court held that the expert’s opinions were undermined by incomplete factual foundations: he had not engaged with the respondents, did not appreciate the genesis of the deal, overlooked the parties’ pre‑existing agreement and the sellers’ risk appetite, and evaluated Lamour’s suretyship with hindsight and limited data. The suggestion of a second bond was speculative and would have been subordinated to the bank’s first‑ranking security in any event, rendering it unlikely to have altered the outcome. The transfer sequence aligned with the deeds’ terms and accepted conveyancing practice; the allegation of negligent timing was not sustained.

On causation, the court found neither factual nor legal causation. Applying the but‑for test, the court concluded it was not probable that, but for any failure to advise on additional security or transfer timing, the loss would have been avoided. The collapse of the development was driven by market conditions and the bank’s funding decisions; these constituted independent, superseding causes. The claimed negligence was not a proximate, legally cognisable cause of the loss, and policy considerations militated against extending liability in the circumstances.

REMEDY

The Supreme Court of Appeal upheld the appeal with costs, including the costs of two counsel where so employed. It set aside the order of the full court and substituted it with an order dismissing the appeal to that court, also with costs including the costs of two counsel.

This remedy restores the trial court’s dismissal of the delictual claim against the conveyancer. It recognises that the full court’s approach erroneously treated an admission relating to negligence as an admission of wrongfulness and failed to conduct the necessary causation inquiry. The costs orders reflect the complexity and importance of the legal issues, warranting the engagement of senior and junior counsel.

The order provides finality to the appellant as to liability in delict and offers clear guidance for future litigation in similar professional negligence claims arising from failed property developments, particularly where plaintiffs have voluntarily assumed commercial risks and possessed available contractual mechanisms for self‑protection.

LEGAL PRINCIPLES

The judgment reiterates that in cases of pure economic loss, wrongfulness is not presumed. Plaintiffs must plead and prove that legal and public policy considerations justify the imposition of liability. Courts must avoid conflating wrongfulness with negligence. An admission of a “duty of care” in pleadings speaks to the conduct standard (fault), not to the separate, policy‑laden enquiry into wrongfulness, which asks whether it is reasonable to impose liability at all.

The court emphasises the “vulnerability to risk” consideration as a critical limiter in pure economic loss claims. Where plaintiffs have realistic alternatives to protect themselves—through contractual terms, security arrangements, or the choice not to proceed—policy generally disfavors extending delictual liability. Self‑assumed commercial risks, especially in high‑reward settings, weigh against imposing a legal duty on third parties to safeguard the bargain.

Causation remains a vital filter. Even if negligence is assumed, plaintiffs must establish a factual causal nexus and that policy considerations support legal causation. Market downturns, bank funding constraints, and pre‑sale failures can operate as intervening causes that render the defendant’s alleged omission too remote to attract liability. The court’s treatment of expert evidence also underscores that expert opinions must rest on complete and accurate factual scaffolding; hindsight‑driven or incomplete analyses will not suffice to establish breach or causation.