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[2019] ZAWCHC 89
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De Waal Incorporated v Property and PIP Solutions (Pty) Ltd (A02/19) [2019] ZAWCHC 89 (27 June 2019)

IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
REPORTABLE
CASE
NO: A02/19
In
the matter between:
DE
WAAL
INCORPORATED
Appellant
and
PROPERTY
AND PIP SOLUTIONS (PTY)
LTD
Respondent
Coram:
P.A.L.Gamble and M.K.Parker JJ
Date
of Hearing: 15 March 2019
Date
of Judgment: 27 June 2019
JUDGMENT
DELIVERED ON THURSDAY 27 JUNE 2019
GAMBLE,
J:
INTRODUCTION
[1]
The respondent (“
PIP
”)
successfully sued the appellant (“
De
Waal
”) in the Regional Court,
Bellville for payment of the sum of R 158 570,40, interest and
costs. De Waal is dissatisfied
with the outcome and seeks to appeal
that order. While the quantum of the order of the Regional Court is
low, the interest awarded
on the judgment debt is to be calculated
from 2009 at the rate of 28,835% per annum. That most likely explains
the reason for the
continuation of litigation which has its origins
as far back as 2008.
[2]
The Regional Magistrate delivered a
detailed and comprehensive judgment in this matter on 12 September
2018 setting out all the
material facts and it is therefore not
necessary to go into any great detail. The factual findings of the
Regional Magistrate,
which were not seriously attacked on appeal,
will serve as the basis for this judgment and I shall accordingly
give only a brief
outline.
BACKGROUND
FACTS
[3]
PIP is a money lender which specializes in
so-called bridging finance. Its guiding mind is one Piet Koen who
commercially exploited
a niche in the property market in
circumstances where a party was short of funds and unable to cover
the outstanding costs (rates
and taxes and the like) necessary to
effect transfer of a property. PIP would then lend such a seller
money and pay the agreed
amount into the conveyancing attorney’s
trust account in advance to enable the outstanding amounts to be
settled. The loan
agreements used in cases such as these usually
provide for the conveyancing attorneys to repay the capital and
interest to PIP
out of the proceeds of a home loan which is secured
through the registration of a bond over the property in question or
from the
proceeds of the sale. The purpose of such bridging finance
is then a short term loan with interest above the usual market rate,

with the transferring attorney playing an important role in the
arrangement.
[4]
De Waal conducts an attorneys’
practice in Durbanville through an incorporated entity. He dabbles in
property development
himself and, when he does so, uses his firm to
do the necessary legal work. In 2008/9 the firm did not employ a
conveyancer and
so de Waal made used of the services of another
Durbanville firm, Lucas Deysel Crouse Inc. (“
Lucas
Deysel
”) to do his property
transfers for him. As I understand the position, Lucas Deysel was
contracted as a consultant by de Waal.
THE
FIRST TRANSACTION
[5]
In 2008 de Waal and a certain Leonard van
der Burgh (“
van der Burgh
”)
were the directors and shareholders of a company known as Shockproof
Investments 49 (Pty) Ltd which owned Erf 5036 Eversdal.
They wished
to dispose of the property an on 8 February 2008 PIP advanced to each
of de Waal and van der Burgh the sum of R120 000
by way of
bridging finance. Separate loan agreements were concluded with each
of them, it being contemplated that the amounts would
be repaid upon
transfer of the property to the purchaser.
[6]
The sale of the property fell through and
de Waal settled his indebtedness to PIP. However, van der Burgh was
unable to settle his
liability and he remained indebted to PIP in the
sum of R120 000. The parties then sought, and eventually found,
a way to
address the problem with de Waal playing a prominent role in
initiating the solution.
THE
SECOND TRANSACTION
[7]
De Waal and van der Burgh jointly owned
another property in Eversdal – Erf 4915. This was owned in
equal shares in their personal
capacities and in January 2009 it was
sold for R2,5m with transfer to be given as close to the end of April
2009 as possible. The
deed of sale was subject to the approval of a
mortgage bond in favour of the purchaser in the amount of R1,5m by 13
February 2009
(a suspensive condition that was met timeously) and the
contract of sale recorded further, inter alia, that transfer of the
property
to the purchaser was to be effected by de Waal, while the
bond registration was to be attended to by a different firm. For the
sake of convenience I shall refer to this as “
the
second
transaction.
”
[8]
On 26 February 2009 van der Burgh concluded
a so-called “
discounting
agreement
” with PIP in terms
whereof it was recorded that the sum of R158 570,40 had been
advanced to him. This amount was not
a fresh advance but rather it
represented the capitalization of the existing indebtedness of
R120 000 on the first transaction
together with interest and
other costs subsequently incurred. The discounting agreement would
run hand-in-hand with the second
transaction and upon transfer of Erf
4915 to the purchaser, de Waal, as conveyancing attorney, would make
payment to PIP of the
aforesaid sum of R158 570,40 on behalf of
van der Burgh.
[9]
As I have said, contrary to the express
terms of the discounting agreement to which I shall refer later,
there was no payment of
any monies to van der Burgh under this
agreement. Payment had already been advanced to him under the first
transaction and the
discounting agreement effectively provided the
contractual basis for the transfer of that earlier indebtedness to
PIP. The description
of the transaction as a discounting agreement is
then somewhat of a misnomer for what was, in essence, a novation (or
possibly
an assignment) but since that is the term which has been
used throughout this litigation I shall similarly do so.
[10]
When Erf 4915 Eversdal came up for transfer
in May 2009 it was rejected because there was an interdict which had
been registered
against transfer of the property by the Deeds Office
on 8 October 2008. This interdict (in essence the consequence of
judicial
attachment generally referred to as a “
caveat
”)
had been procured by a company called Sentronics (Pty) Ltd in August
2008 after it had obtained a warrant of execution
from the Registrar
of this Court attaching van den Burgh’s half share in the
property. The warrant of execution was issued
pursuant to an order
for summary judgment in the amount of R128 360,57 (together with
interest and costs) granted in favour
of Sentronics by this Court
against van den Burgh on 23 April 2008. In the result, the purchaser
of Erf 4915 was unhappy with the
delays and cancelled the deal. There
was then no pending property transaction upon which PIP could rely
for repayment of its short-term
loan to van der Burgh, who continued
to be indebted to PIP.
[11]
Van den Burgh was clearly financially
embarrassed and as the creditors began circling, on 12 August 2009 he
signed an acknowledgement
of debt in favour of PIP in the amount of
R158 570,40. That acknowledgment of liability was rendered
valueless when, on 15
September 2009, Lucas Deysel, relying on an
unpaid invoice for professional services rendered, applied for van
den Burgh’s
sequestration in this Court. The provisional order
granted on that date was subsequently confirmed and, in the result,
PIP was
unable to recover anything from van der Burgh’s
insolvent estate. It could, I suppose, have walked away from the deal
at
that stage and written off van der Burgh’s obligation as a
bad debt. However, it decided to look elsewhere to make good its

losses and turned to de Waal.
THE
CLAIMS BROUGHT AGAINST DE WAAL
[12]
On 12 December 2011 PIP issued summons
against de Waal for recovery of the advance made to van der Burgh
under the first transaction
and relied on the terms of the
discounting agreement as its primary cause of action – an
alleged breach of warranty by de
Waal. There was a first alternative
claim for breach of an implied (alternatively tacit) term in the
discounting agreement that
de Waal had failed to exercise the
reasonable professional skill, care and diligence expected of him as
an attorney. The second
alternative claim against de Waal was
delictual, it being alleged that he had been negligent as an attorney
in failing to become
aware of the fact that the property was the
subject of judicial attachment.
[13]
During the course of a protracted and
expensive trial (which ran over several years and included a
successful appeal to this court
against an earlier ruling of
absolution from the instance by the Regional Magistrate in favour of
de Waal), the plaintiff’s
particulars of claim were amended in
order to amplify its cause of action. That amendment ultimately
limited the issues for determination
by the trial court as will be
seen shortly.
THE
MATERIAL TERMS OF THE DISCOUNTING AGREEMENT
[14]
To consider the contractual claim against
de Waal it is necessary to have regard to the contract relied upon.
PIP made use of its
pro forma
document
entitled “
Discounting Agreement”
in respect of both the February 2008 advances of R120 000 each
to de Waal and van der Burgh, and the February 2009 advance
of
R158 570,40 to van der Burgh. The two agreements concluded are
identical in form save for the manuscript insertions therein
relating
to,
inter alia
,
names, addresses, erf numbers and amounts of indebtedness. For the
sake of convenience I shall refer only to the second document
dated
26 February 2009 as it is the agreement ultimately relied upon by PIP
in seeking to hold de Waal contractually liable for
the amount
advanced to van der Burgh under the first agreement. That document
expressly records (by way of manuscript insertion)
that it replaces
the first transaction.
[15]
The material terms of this second
discounting agreement were as follows.
(i)
PIP would advance money to van der Burgh on
the terms and conditions set forth in the agreement;
(ii)
Van der Burgh was entitled to certain
proceeds arising from the sale of Erf 4915;
(iii)
Van der Burgh sold or ceded to PIP the
proceeds (or part thereof) of the sale;
(iv)
The advance required by van der Burgh from
PIP amounted to R158 570,40 and was ostensibly required for
“
Seller’s Profit
”.
I take this to mean that van der Burgh did not need an advance on the
proceeds of the sale to cover, for example, outstanding
municipal
rates but rather that he was taking his profit on the deal early;
(v)
On acceptance of the terms of the agreement
PIP would immediately pay the said amount into de Waal’s
attorneys trust account;
(vi)
The amount advanced to van der Burgh would
become due and repayable to PIP on either the date of registration of
the sale of Erf
4915, or the date of registration of the bond of
R1,5m over it;
(vii)
In the event that the sale of the property
was cancelled for whatever reason, the amount advanced by PIP would
become due and payable
to it by van der Burgh forthwith; and
(viii)
The amount advanced by PIP was for a
maximum period of 120 days, and irrespective of what else occurred,
that sum would become due
and payable by van der Burgh after the
lapse of such period.
[16]
The discounting agreement comprises 2
distinct parts. The first (comprising clauses 1 to 11) contains the
details, terms and conditions
just referred to with various
manuscript insertions therein and makes provision for signature by
PIP and van der Burgh.
[17]
The second part of the discounting
agreement contains clause 12 with the following wording which is
central to this litigation.
The relevant portion thereof (
sans
manuscript insertions) is accordingly
cited in full.
“
12.
UNDERTAKING AND WARRANTIES BY
TRANSFERRING/BOND REGISTRATION ATTORNEY
……
12.1 All suspense
(sic) conditions relating to the transaction applicable to this
agreement has (sic) been met.
12.2 All parties have
signed all relevant documentation.
12.3 I have been duly
authorised and instructed to attend to the registration mentioned in
1.
12.4 The full amount
advanced plus interest and costs will be paid over to PIP on date of
registration of the sale or registration
of the bond of the
transaction applicable to this agreement.
12.5
I confirm that there are
sufficient funds available from the proceeds to cover the advance
plus interest and costs.
(Emphasis
added.)
12.6
Attorneys Trust account details…”
Provision
is made at the end of clause 12 for signature by the conveyancing
attorney involved. In this matter, it is common cause
that de Waal
signed in his capacity as the attorney responsible for the
registration of the transfer from himself and van der Burgh
to the
purchaser. As already stated, a manuscript annotation to clause 12
records that it is in substitution of the undertaking
given in
respect of the first transaction.
[18]
At the conclusion of the evidence before
the Regional Magistrate (and after the matter had been sent back to
him by this Court),
it was common cause that the issue for
determination was whether clause 12.5 of the discounting agreement
placed any personal contractual
obligation on de Waal in favour of
PIP and, if so, whether he was in breach thereof. The Magistrate
answered both questions in
the affirmative and found in favour of
PIP. He also found in favour of PIP on the 2 alternative causes of
action.
PIP’s
CONTRACTUAL CLAIM UNDER CLAUSE 12.5
[19]
As
alluded to above, PIP relied, firstly, on a contractual claim for
what it termed a breach of warranty by de Waal. This was eventually

narrowed down (after the amendment of the pleadings referred to
earlier) to reliance exclusively on clause 12.5 of the discounting

agreement. In the result it was said that de Waal’s signature
to the second part of that agreement constituted a warranty
by him
that there were sufficient funds available from the proceeds of the
sale of Erf 4915 to cover the full extent of van der
Burgh’s
indebtedness to PIP, which in fact was not the case. The claim is for
de Waal to “make good the warranty”.
[1]
[20]
PIP
contended further that de Waal’s liability to it under the
clause in question was strict because it constituted a warranty
in
the sense referred to by
Van
der Merwe et al
[2]
“
A
warranty is a contractual term by which a contractant assumes
absolute or strict liability for proper performance, to the extent

that he cannot rely on the impossibility of performance or absence of
fault to escape liability. A warranty is an
incidentale
(accidentale)
of a contract that extends the liability of a contractant beyond the
liability imposed by the
essentialia
and
naturalia
of the contract. Inasmuch as it is an
incidentale
a warranty is a
consensual term of the contract.”
[21]
In
Masterspice
[3]
Farlam JA dealt in detail with the legal derivation of the word
“
warranty”.
“
[33]
The expression ‘warranty’ comes from English law. In
England it has been described as ‘one of the most ill-used

expressions in the legal dictionary’ (
Finnegan
v Allen
[1943] 1 KB 425
at 430).
A ‘warranty’ is usually distinguished from a ‘condition’,
the point of distinction being that
a condition is a term whose
breach entitles the injured party to treat a contract as discharged,
while a ‘warranty’
is a term whose breach entitles the
injured party only to damages: See Chesire, Fifoot and Furmston
Law
of Contract
14 ed at 166 and ss
11(1)(b) and 62 of the Sale of Goods Act, 1893, and ss 11(3) and 61
of the Sale of Goods Act, 1979, of the
United Kingdom.
[34]
As appears, however, from the extract from
Small
v Smith
(supra)
[4]
,
the expression ‘warranty’ is sometimes used to describe a
term the breach of which entitles the injured party to cancel
the
contract, what is, as has been seen, more properly described in
English law as a ‘condition’. I agree with the
view
expressed by Prof RH Christie in
The
Law of Contract
4 ed at 598, that the use of the words ‘condition’ and
‘warranty’ to describe contractual terms is best
avoided,
not only because of the danger of confusion between conditions in the
sense of contractual terms whose breach entitles
the injured party to
cancel, and what Prof Christie calls ‘true’ conditions,
i.e. suspensive or resolutive conditions,
which are not contractual
terms at all, but also because we have adopted the English
terminology of describing as ‘warranties’
terms in
insurance policies and some other contracts which are really terms
the material breach of which justifies cancellation.
[35]
In view of the fact that the word ‘warranty’ can mean a
term whose breach only gives rise to a claim for damages
but can also
mean a term whose material breach gives rise to a right to cancel, it
is necessary, in every case where the expression
is used, to examine
the terms of the contract in question closely in order to endeavour
to ascertain in what sense the parties
have used it. I do not think
that the parties in the present case attached any special
significance to the word or that there is
any basis for holding that
they intended it to mean a term whose breach gives rise to a claim
for cancellation even if, notionally,
a monetary payment could remedy
the problem.”
[22]
PIP’s claim under this cause of
action is predicated on an assumption of personal liability on the
part of de Waal, when assenting
to the provisions of clause 12.5,
that in the event that there were, at the end of the day,
insufficient funds to pay over to PIP
what was due to it, PIP could
look to him to make good its losses under the discounting agreement.
In the result, PIP sought to
recover, by way of damages for breach of
contract, its positive
interesse
from
de Waal, asking that it be placed in the position in which it would
have been if indeed there were sufficient funds available
to effect
registration of transfer of the property.
[23]
Gardiner
J approached the question of a contractual warranty thus in
Naude
[5]
, a case involving an action
for damages for breach of contract flowing from the sale of a house
where there was a representation
by the seller regarding its good
condition and a failure on his part to disclose certain defects in
the
merx.
“
We
have to ascertain whether both parties intended to contract that the
thing sold should be as represented, whether the seller
intended to
bind himself in law that the thing would comply with what he had
stated, or at any rate so acted as to estop himself
from denying such
intention. It is not sufficient that the purchaser relied on the
statement - that may be enough for a
dictum
,
but not for a
promissum
- it must also be shown that the seller contracted that the statement
would be made good. That he made the statement in answer
to a
question may be an argument for holding that there was a
promissum
,
but it is an argument which is not conclusive. The circumstances in
which the statement was made, the fact that nothing was done
to
confirm it in writing, the vagueness of the statement - lead me to
think that the defendant had no intention of binding himself
to make
the statement that the house was well-built. At all events the
plaintiff has failed to satisfy me that there was such an
intention…”
[24]
In the context of the facts at hand, PIP consequently bore the onus
to show that the parties had agreed that de Waal intended
personally
to stand in for payment of the funds due to PIP by van der Burgh
under the discounting agreement, in the event that
there were not
sufficient funds available when the transfer of the property
ultimately took place. I should stress that this case
is not about an
actionable misrepresentation (whether fraudulent, negligent or
innocent) on the part of de Waal inducing the contract.
[25]
There have been a number of decisions more recently involving
instances of bridging finance where a party (often the conveyancing

attorney) has furnished a guarantee that a specified state of affairs
exists and that payment will be made pursuant to that state
of
affairs.
[6]
Those decisions have
repeatedly stated that each case must be considered on its merits
and, in particular, that the so-called warranty
clause must be
contextually interpreted against the factual matrix within which the
parties were operating so as to give it commercial
sensibility.
[7]
[26]
Moreover, there is no magic to be found in the use of words such as
“
warranty
”
or “
guarantee
”
as Diemont JA observed in
List
[8]
-
“
[It
is] an unrewarding and misleading exercise to seize on one word in a
document, determine its more usual ordinary meaning, and
then, having
done so, to seek to interpret the document in the light of the
meaning so ascribed to that word…”
[27]
In
Hermes
[9]
Kriek J was required to deal with a document in which a third party
had undertaken to pay the debt of a supplier of goods to a
vessel to
avoid it being arrested. After a detailed discussion of the cases the
Learned Judge concluded as follows.
“
The
passages from the various judgments I have mentioned deal with the
popular or ordinary meaning of the word ‘guarantee’,
but
it seems to me that they demonstrate only that the word is capable of
bearing different meanings depending upon the context
in which it is
used. It seems to me also that when the meaning of the word in a
particular document is being considered, it is
undesirable to
commence the enquiry on the basis that any one of its possible
meanings predominates, and that the proper approach
to the question
is to be alive to the various meanings which it can bear and by a
consideration of the context in which it is used
(together with such
other circumstances as may be permissible) to decide which meaning
must be attributed to it in that context.”
[28]
The judgment in
Hermes
highlights what has since been endorsed as the contemporary approach
to contractual interpretation: consideration of “
the
backdrop of the factual matrix providing the context in, and the
purpose for which,
”
the document was drafted.
[10]
[29]
In this case we are dealing with an ordinary commercial document - an
agreement of loan for short-term bridging finance between
PIP and Van
der Burgh - and one asks, firstly, why a conveyancing attorney such
as de Waal would allow himself to become a party
to such an agreement
? And, flowing from that, one asks whether it makes commercial sense
for the attorney entrusted with the conveyancing
of the property to
expose himself to personal liability in the event of default by the
debtor under such agreement? In my view,
to answer those questions
one must look at the contextual setting of the entire clause 12 in
the relation to the discounting agreement
as a whole.
[30]
It will be observed that the clause is headed “
Undertaking
and Warranties by Transferring/Bond Attorney”
and contains,
firstly, a recordal that the necessary paperwork has been attended to
in order to facilitate transfer of the property.
Then, in cl 12.4,
there is an undertaking by de Waal that he will pay over to PIP the
full amount of the loan granted to van der
Burgh on transfer of the
property. Finally, the clause records confirmation by de Waal that
there were indeed funds available for
repayment of the loan to PIP.
[31]
In my view, firstly, cl 12.4 does not constitute an unconditional
warranty by de Waal in favour of PIP. As in
Steyn
Lyell
[11]
,
the clause constitutes no more than an undertaking by de Waal that,
when placed in funds, he would pay over to PIP what was due
to it
under the discounting agreement. It cannot be construed as an
unconditional guarantee by de Waal that he would pay over R158 570,40

to PIP “
regardless
”.
Such an undertaking (which is really akin to him standing surety for
the obligations of van der Burgh) cannot be adduced
from the context
of the clause in the agreement as a whole and, importantly, would
lack commercial rationale since “
(i)t
would have been absurd for the appellant to have given an
unconditional, independent undertaking in these circumstances
”
[12]
,
particularly where he knew of van der Burgh’s financial
problems.
[32]
In the result, PIP did not rely on cl 12.4 as constituting a warranty
by de Waal in its favour. Rather, as I have already said,
it looked
to cl 12.5 as constituting the basis for relief under this leg of the
claim. But cl 12.5 does not contain any words or
phrases suggesting
that it constitutes a warranty in any of the senses referred to
above. Indeed, the only reference to a warranty
anywhere in the
discounting agreement is the use of the word in the general heading
to cl 12.
[33]
In my view, cl 12.5 constitutes no more than the recordal of a
statement of fact upon which PIP was entitled to rely when it

considered whether to conclude the loan agreement with van der Burgh
or not. The representation by de Waal that there were funds
available
to effect repayment of the loan to PIP was, no doubt, a factor which
induced PIP to lend money to van der Burgh but it
went no further
than that. At best for PIP, the confirmation of the availability of
funds by de Waal was a
dictum
in the sense referred to by
Gardiner JP in
Naude
and I am not persuaded that PIP
established that such confirmation in fact constituted a
promissum.
[34]
If cl 12.4 then does not constitute a warranty, I cannot see any
basis for holding that cl 12.5 afforded PIP a cause of action
based
on breach of warranty either. The latter clause contains no reference
to a warranty nor does the language employed by PIP
in this clause of
its
pro forma
document suggest anything approximating a clear
and unequivocal undertaking by de Waal to pay anything to PIP in the
event that
there were not sufficient funds available at the time of
transfer. In my view cl 12.5 does not sustain any argument for a
warranty
on the part of de Waal which was capable of being breached
and subsequently sought to be “made good”. In the result,

I am of the view that the Regional Magistrate erred in finding in
favour of PIP on the main cause of action.
THE
CLAIM FOR BRACH OF A TACIT TERM
[35]
The first alternative cause of action relied upon by PIP was that the
discounting agreement incorporated a tacit term that
de Waal would
exercise reasonable professional skill and due care and diligence in
performing his mandate  and thereby establish
that Erf 4915 was
in fact the subject of a
caveat
and advise PIP accordingly.
[36]
The well-known test for the importation into an agreement of a tacit
term was articulated by Corbett AJA in
Alfred
McAlpine
[13]
and is commonly referred to as “
the
innocent bystander”
test. Accordingly a tacit term will not be readily imported into the
discounting agreement and before it may be so imported –
“
the
Court must be satisfied, upon a consideration in a reasonable and
businesslike manner of the terms of the contract and the admissible

evidence of surrounding circumstances, that an implication
necessarily arises that the parties intended to contract on the basis

of the suggested term… The practical test to be applied - and
one which has been consistently approved and adopted in this
Court -
is that formulated by Scrutton L.J., in the well-known case of
Reigate v Union Manufacturing Co
118 L.T. 479
at p483:
‘
You
must only imply a term if it is necessary in the business sense to
give efficacy to the contract; that is, if it is such a term
that you
can be confident that if at the time the contract was being
negotiated someone had said to the parties: “What will
happen
in such a case?” they would both replied: “Of course,
so-and so. We did not trouble to say that; it is too clear.”
This
is often referred to as the ‘bystander test’.”
[37]
Applying this test to the facts at hand, the question to be posed is
the following: at the time the discounting agreement was
concluded,
was it understood and agreed upon between the parties that de Waal,
in discharging his contractual obligations, would
be required to act
with the professional skill, care and diligence of a reasonable
attorney? If the parties would unequivocally
have confirmed that to
be the basis for their agreement, and it was necessary to give
business efficacy to the agreement, then
the term is capable of being
imported into the discounting agreement.
[38]
I have little doubt that such a term may be imported in the instant
case. Firstly, there is the importance of the role played
by de Waal
in the current milieu. By virtue of his professional calling he was
trusted by the parties to do what a reasonable professional
person
would be required to do. Moreover, not only was de Waal required by
PIP to become a party to the discounting agreement (as
would any
attorney charged with overseeing the transfer of the property in
question), he was specifically alerted to the importance
of the deal
proceeding unhindered by Koen in an email of 23 February 2009 to
which reference is made hereunder. Of course, de Waal
did not really
need to be alerted thereto in light of the fact that he was part and
parcel of the failed first agreement and had
played an active role in
setting up a second agreement whose object was to ensure that PIP was
not out of pocket in the circumstances.
[39]
But at the end of the day, the point is really this. De Waal’s
involvement in both the first and second transactions
was both as a
co-contractant and as an attorney, acting in his professional
capacity. It is axiomatic that in the latter role he
would be
required to discharge his function in a reasonable and professional
fashion.
THE
CLAIM BASED ON PROFESSIONAL NEGLIGENCE
[40]
The second alternative cause of action is founded in delict. As a
claim based on pure economic loss, it was necessary for PIP
to prove,
not only negligence on the part of de Waal, but also that his conduct
was wrongful in failing to establish that the statement
contained in
cl 12.5 was wrong. Wrongfulness in turn depends on the existence of a
legal duty or a duty of care on the part of
de Waal in the
circumstances.
[14]
PIP’s
argument was predicated on the fact that de Waal, as the attorney
with the ultimate responsibility for the transfer
of the property,
had a legal duty to PIP to ascertain whether Erf 4915 was under
attachment or not and that he failed to do so
thereby occasioning PIP
its loss. The alternate claims will be conveniently considered
together since there is an obvious overlap
in the evidence relevant
thereto.
EVIDENCE
RELEVANT TO THE ALTERNATIVE CAUSES OF ACTION
[41]
It was common cause that de Waal and van der Burgh were on amicable
terms and had been jointly involved in property development
and
related dealings before 2008. The self-evident facts in relation to
the first transaction in February 2008 are that van der
Burgh was
unable to repay PIP what was due to it when the sale of the property
in question fell through and de Waal would undoubtedly
have been
aware of van der Burgh’s inability to do so at that stage. That
fact would have alerted him to the possibility
that van der Burgh was
financially stretched and that caution should be applied in regard to
any future financial dealings with
him.
[42]
It was not conclusively established on the evidence that de Waal knew
that Sentronics had taken judgment against van der Burgh
in April
2008 or that the Registrar had issued the warrant of execution
against van der Burgh’s half-share in Erf 4915 in
August 2008.
That having been said, De Waal’s claim that he did not know of
the judgment must be considered in the context
of his poor
performance in the witness box and his patent dishonesty at times.
Just one example will suffice.  De Waal said
that he knew
nothing about the steps taken by Lucas Deysel to urgently sequestrate
van der Burgh in September 2009, yet it later
transpired that he had
in fact commissioned the founding affidavit deposed to by Mr. Crause
in those proceedings. The ineluctable
inference is that de Waal
assisted his business partner by arranging for Lucas Deysel to launch
a friendly sequestration application
to relieve van der Burgh of his
financial misery.
[43]
And, while one might easily speculate about the probabilities in
regard to the veracity of de Waal’s denials regarding
knowledge
of van der Burgh’s financial predicament during the second half
of 2008, there is clear proof that on 23 February
2009 de Waal was
alerted thereto when Koen informed him in an email of the fact that
van der Burgh had been given the statutory
notice required under s129
of the National Credit Act to enable PIP to proceed to recover the
debt due to it under the first transaction.
Any reasonable attorney
would have realized that this process signaled a recalcitrant debtor.
More importantly, de Waal was cautioned
by Koen in that email of van
der Burgh’s failure to honour his promises in the past and was
instructed by Koen to ensure
that there would be no obstacles in the
way of the transfer of Erf 4915.
[15]
[44]
It is a matter of undisputed fact that when de Waal signed the
discounting agreement on 26 February 2009, the property was
not
capable of being transferred due to the
caveat
and that the
statement regarding the availability of funds contained in cl 12.5
was accordingly incorrect. Mr. Nabal (who appeared
for de Waal in the
court
a quo
and on appeal) submitted in argument that the
probabilities were that neither de Waal nor Lucas Deysel knew of
this. He elaborated
on this point by arguing that it would have
served no purpose, nor made commercial sense, to put up a deed for
transfer in circumstances
where the property was still the subject of
judicial attachment and thus incapable of transfer. For the purposes
of this judgment
I will assume that this is a fair inference in the
circumstances.
[45]
The question that therefore arises for the purposes of determining
the two alternative causes of action is what steps a prudent
attorney
ought to have taken to ensure the integrity of the allegation made in
clause 12.5. To be sure, cl 12.4 and 12.5 are central
to the
attorney’s participation in any discounting agreement given
that PIP would only advance a short-term loan to the borrower
if it
was satisfied that the money would be repaid within the 120 day
period stipulated in the agreement. And, given that such
monies were
to be sourced either from the proceeds of a mortgage bond to be
registered by the purchaser or from the balance of
the purchase price
once paid by the purchaser, PIP would want to be assured by the
attorney handling the transaction that the funds
would be available
in either event.
[46]
In the circumstances that prevailed, the question is whether a
reasonable and prudent attorney would have conducted a Deeds
Office
search to establish whether there was a
caveat
over the
property or not, or, for that matter, whether there was any other
impediment to its transfer. For, if there were such an
impediment,
then PIP would not be able to recover its loan from the proceeds of
the transaction at transfer and the purpose of
the discounting
agreement would be thwarted. PIP could therefore expect that a
reasonable and prudent attorney would inform it
of the fact that it
was not likely to recover its loss from the proceeds if that were
indeed the case.
[47]
It is common cause that on the same day that Koen sent the email
referred to above to de Waal, a Deeds Office search was conducted
on
the latter’s behalf by Lucas Deysel. The problem for de Waal is
that that search was conducted, not in respect of Erf
4915 in
particular, but rather in respect of properties owned by van der
Burgh. In other words, Lucas Deysel’s search sought
the wrong
information – not what the status (if any) was regarding any
caveat
over Erf 4915, but whether van der Burgh was indeed the
owner thereof.
[48]
In argument Mr. Nabal fairly conceded that neither de Waal nor his
agent for the purposes of the enquiry, Lucas Deysel, conducted
the
correct search. He further accepted that, had the correct search had
been conducted, de Waal would have been alerted to the
existence of
the
caveat
before he signed the discounting agreement and was
likely to have acted otherwise than he did. Certainly, in my view, de
Waal would
have been duty bound to inform PIP that it was unlikely to
recover its loan from the proceeds of the transfer. That, after all,

was the intention behind the provisions of cl 12.5.
[49]
Mr. Nabal, himself an experienced conveyancer, also fairly accepted
that while, generally speaking, a conveyancer owes a duty
of care to
both the seller and the purchaser, in the circumstances which
prevailed in this matter, de Waal undoubtedly owed such
a duty to
both seller and purchaser as well as to PIP. Mr. Nabal accepted,
further, that it was fair to demand of Mr. de Waal a
high degree of
vigilance in dealing with the transfer in light of Mr. Koen’s
express instructions to him in the email of
23 February 2009 that
there should be no problems. To that I would add that in light of the
importance, generally, of the role
played by a conveyancer in
bridging finance arrangements such as those offered by PIP, it would
be expected of de Waal to have
discharged his functions without any
short-comings.
[50]
Mr. Nabal did not concede, however, that de Waal acted in breach of
the tacit term as pleaded in the first alternative cause
of action
nor negligently as alleged in the second alternative cause of action.
In that regard it was submitted that before negligence
could be found
to exist it had to be shown that de Waal, firstly, was in breach of a
duty of care owed to PIP and secondly, that
any damages suffered by
PIP were causally linked to such breach.
DUTY
OF CARE
[51]
The approach in assessing the circumstances in which an attorney is
saddled with a duty of care in a matter such as this was
dealt with
in detail on behalf of the Full Bench by Magoka J in
Doug
Parsons
[16]
.
The matter involved a claim against a conveyancing firm arising out
of its alleged failure to conduct certain enquiries regarding
a
party’s VAT status and the incorrect payment of monies accruing
from a property transaction to a third party.
“
[19]
I start with the enquiry whether there was a legal duty, i.e. whether
there was wrongfulness of the part of the respondent.
This is so
because, conceptually, wrongfulness is anterior to negligence. Simply
put, absent the legal duty, the issue of negligence
becomes
irrelevant. See
Loureiro and
others v Imvula Quality Protection (Pty) Ltd
[2014
(3) SA 394
(CC) at para 54]. The development of wrongfulness as a
criterion for determining the boundaries of delictual liability has
its
basis in
Minister van Polisie
v Ewels
[1975 (3) SA 590
(A)].
In that case the Appellate Division found that our law had reached
the stage of development where an omission is regarded
as unlawful
when the circumstances of the case are of a nature that the legal
convictions of the community demand that the omission
should be
considered wrongful.
[20]
It must be borne in mind that negligent causation of pure economic
loss is not regarded as prima facie wrongful. Its wrongfulness

depends on the existence of a legal duty. The imposition of this
legal duty is a matter of judicial determination involving criteria

of public or legal policy… In determining in a given case
whether the defendant’s conduct which resulted in foreseen
or
foreseeable economic loss was unlawful or wrongful, the question is
always whether it would in all circumstances be reasonable
to
recognise that the defendant owed the plaintiff a duty not to cause
loss. Put differently, the question is whether the reasonable
person
in the defendant’s position would in all circumstances have
recognised that he owed the plaintiff a duty of care.
Certain
guidelines have been laid down by our courts in this regard. See, for
example,
Coronation Brick Pty Ltd
the Strachan Construction
Co
(Pty) Ltd
[1982 (4) SA 371
(D)
at 384D-E)]….
[22]
In
Knop v Johannesburg City
Council
[1995 (2) SA 1
(A) at 27
G-I] Botha JA…said:
‘
The
existence of the legal duty to prevent loss is a conclusion of law
depending on a consideration of all the circumstances of
the case.
The general nature of the enquiry is stated in the well-known passage
in Fleming
The Law of Torts
4
th
ed at 136, quoted in… [
Administrator,
Natal v Trust Bank van Afrika Bpk
1979
(3) SA 824
(A) at 833]:
“
In
short, recognition of a duty of care is the outcome of a value
judgment, that the plaintiff’s invaded interest is deemed

worthy of legal protection against negligent interference by conduct
of the kind alleged against the defendant. In the decision
whether or
not there is a duty, many factors interplay; the hand of history, our
ideals of morals and justice, the convenience
of administering the
rule and our social ideas as to where the loss should fall. Hence,
the incidence and extent of duties are
liable to adjustment in the
light of the constant shifts and changes in community attitudes.”
The
enquiry encompasses the application of the general criterion of
reasonableness, having regard to the legal convictions of the

community as assessed by the Court…”
[52]
It will be observed from the aforegoing
dictum
(based as it is on a long line of established authorities) that the
occasioning of loss to a party lies at the heart of consideration
of
the opposing party’s duty of care. Indeed, that is what Holmes
JA stressed in
Kruger
v Coetzee
[17]
,
the
locus
classicus
in
which the test for negligence is set out.
“
For
the purposes of liability
culpa
arises if –
(a)
a
diligens
paterfamilias
in the position of
the defendant-
(i)
would foresee the reasonable
possibility of his conduct injuring another in his person or property
and causing him patrimonial loss;
and
(ii)
would take reasonable steps to guard
against such occurrence;
and
(b)
the defendant has failed to take
such steps…
Whether
a
diligens paterfamilias
in the position of the person concerned would take any guarding steps
at all and, if so, what steps would be reasonable, must always
depend
upon the particular circumstances of each case. No hard and fast
basis can be laid down.”
(Emphasis
added)
[53]
I have little hesitation in finding, in the specific circumstances
which prevailed in this somewhat unusual commercial transaction,
that
de Waal was duty bound to establish the accuracy of the statement
contained in cl 12.5. The very purpose of that clause was
intended to
give PIP the assurance that it was commercially prudent to conclude
the discounting agreement. De Waal had been cautioned
by Koen that
there should be no impediment in the second agreement involving van
der Burgh and in agreeing to be bound by the provisions
of cl 12.5 de
Waal effectively assured Koen of this.
THE
LOSS SUFFERED BY PIP
[54]
The evidence in this matter establishes, without debate, that PIP
suffered a loss of R120 000 when van der Burgh was unable
to
repay his half-share of the bridging finance loan which formed the
basis of the first transaction when that deal fell through.
At that
stage PIP would have been fully within its rights to take action
against van der Burgh to recover its loss but it elected
not to do
so. Rather, it decided to hold matters in abeyance (most likely
because of the entreaties of de Waal on behalf of his
business
partner) and await the sale of a different property in which van der
Burgh had an interest before recovering its loan.
[55]
And, when such an opportunity presented itself a year later, PIP
calculated its capitalized loss at R158 570,40, being
the
initial sum of R120 000 together with interest which had accrued
in the interim and legal costs which it had incurred.
This was the
loss which PIP and van der Burgh agreed was due to the former in
February 2009. The question that then arises is what
patrimonial loss
PIP suffered through de Waal’s admitted failure to establish
that transfer of the property was not possible
due to the interdict.
Put differently, how would PIP’s patrimony have   affected
if de Waal had done what he was
supposed to do, conducted the correct
Deeds Office search and advised PIP of the interdict lodged against
the property?
[56]
The facts here resemble, to a degree, those before the Appellate
Division in
Siman
, a case involving a misstatement by a bank official regarding the
alleged non-availability of foreign exchange at a time when

devaluation of the Rand was imminent and which was subsequently found
to have financial implications for the client requesting
same. In the
judgment for the majority Trollip AJA found that the bank official
had indeed made a misstatement but that this had
not caused the
client’s loss as it had not been proven in evidence that such
foreign exchange would have been available to
it as a matter of fact
even if there had been no misstatement. The bank official’s
negligence was therefore not causally
connected to the customer’s
loss and was regarded as “
negligence
in the air.
”
[18]
[57]
The answer to the question posed earlier, in my view, is therefore
that de Waal’s failure to perform the Deeds Office
search that
he was duty bound to conduct had no patrimonial consequences for PIP.
The damage to its patrimony had occurred a year
earlier when van der
Burgh defaulted on his obligations under the first transaction and
the loss occasioned by that default was
held in abeyance and carried
through to 2009 when it was subsumed in the discounting agreement.
There can be little doubt that,
had de Waal done his homework and
informed PIP that there was a
caveat
in place and that the
transfer could therefore not proceed, PIP would not have concluded
the discounting agreement.  What
it would then have done to make
good its patrimonial loss remains a matter of speculation.
[58]
But what is clear is that by then the loss had already been suffered
and there was no further damage which could be occasioned
to PIP’s
patrimony by de Waal’s failure to do what a reasonable attorney
would have done. In the result, de Waal’s
breach of the duty of
care which he owed to PIP did not cause it any harm since it was not
causally linked to PIP’s damage.
It was, in the classic sense,
negligence in the air. These findings, in my view, dispose of both
the first and second alternative
causes of action.
CONCLUSIONS
[59]
In the result, I am of the view that PIP, firstly, failed to
establish that de Waal was in breach of any warranty contained
in cl
12.5. Secondly, I am satisfied that PIP established the tacit term
contended for and the breach thereof. Thirdly, I am satisfied
that
PIP established that de Waal was negligent in failing to establish
that there was a
caveat
over the property.
[60]
However, I am not persuaded that it was established that de Waal’s
breach of the duty of care owed to PIP or his negligence
was causally
linked to PIP’s loss. It follows in my view that the Regional
Magistrate erred in upholding PIP’s claims
against de Waal
which should, in the circumstances, have been dismissed. The appeal
must therefore succeed.
COSTS
[61]
In light of the conclusion that the findings of the Regional
Magistrate fall to be set aside and that PIP’s claims fall
to
be dismissed, it is open to this court to consider afresh the
question of costs in the trial court. Ordinarily, costs should
follow
the result and PIP should be ordered to bear de Waal’s costs in
that forum. However, in light of his overall conduct
in this matter,
his breach of his professional duty to PIP and, most importantly, his
poor performance in the witness box in giving
evidence which was
riddled with untruths and improbabilities, I believe it is
appropriate for the court to express its displeasure
towards the
attorney’s conduct by depriving him of his costs in the trial
court. This will be just and equitable in the circumstances.
ORDER
OF COURT
Accordingly
it is ordered that:
A.
The appeal is upheld with costs.
B.
The order of the Regional Magistrate is set
aside and replaced with the following –
1.
The plaintiff’s claims are dismissed.
2.
Each party is to bear its own costs in the
trial court, save for the costs order made in respect of the appeal
to this court under
case number A 230/2015, against the granting of
absolution from the instance, which order will stand.
__________________
GAMBLE,
J
I
AGREE.
______________________
PARKER,
J
[1]
Protea
Property Holdings (Pty) Ltd v Boundary Financing Ltd (formerly known
as International Bank of Southern Africa Ltd) and others
2008 (3) SA 33
(C) at 43B
et
seq.
[2]
Van der
Merwe, van Huyssteen, Reinecke and Lubbe,
Contract General Principles, 4
th
ed at 256.
[3]
Masterspice
(Pty) Ltd v Broszeit Investments CC
2006 (6) SA 1 (SCA)
[4]
1954 (3) SA 434
(SWA) at 437 A-E
[5]
Naude v
Harrison
1925 CPD 84
at 90
[6]
See, for instance,
Kruger
v Property Lawyer
[2011] ZASCA 80
(27 May 2011),
North
East Finance (Pty) Ltd v Standard Bank of South Africa Ltd
2013 (5) SA 26
(SCA),
Stupel
& Berman Inc. v Rodel Financial Services (Pty) Ltd
2015 (3) SA 36
(SCA) and
Steyn
Lyell Maeyane Attorneys v Oelofse
[2017]
ZASCA 18
(23 March 2017)
[7]
Kruger
at [8];
Steyn
Lyell
at [4] – [5]
[8]
List v
Jungers
1979 (3) SA 106
(A) at 118D-G
[9]
Hermes
Ship Chandlers (Pty) Ltd v Caltex Oil SA Ltd
1973 (3) SA 263
(D) at 267
[10]
Kruger
at [4]
and the cases referred to therein.
[11]
At
[16].
[12]
Kruger
at
[10]
[13]
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974 (3) SA 506
(A) at 531D – 533C
[14]
Administrateur,
Natal v Trust Bank van Afrika Bpk
1979 (3) SA 824
(A) at 833A;
Siman
& Co (Pty) Ltd v Barclays National Bank Limited
1984 (2) SA 888
(A) at 913G – 914C.
[15]
“
Ongelukkig
het Leon nie aan sy beloftes teenoor ons gehou nie en versoek ek dat
daar by die nuwe geval
[i.e.
the transfer of Erf 4915]
geen
rede moet wees hoekom die transaksie nie sal kan registreer nie.”
[16]
Doug
Parsons Property Investments (Pty) Ltd v Erasmus De Klerk Inc.
2015 (5) SA 344 (GJ)
[17]
1966
(2) SA 428
(A)
at 430E-F
[18]
See
also
Sea
Harvest Corporation (Pty) Ltd and another v Duncan Dock Cold Storage
(Pty) Ltd and another
2000 (1) SA827 (SCA) at 840E.