RISKALERTMAY 2013 NO 2/2013

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1 A joint publication of the Attorneys Fidelity Fund and the Attorneys Insurance Indemnity Fund (A Non Profit Company, Registration No. 93/03588/08) MAY 2013 NO 2/2013 IN THIS EDITION RISK MANAGER S COLUMN CLAIMS TRENDS as at 31 December RAF MATTERS Adjusted figure for statutory limit for loss of earnings as at 31 January Ann Bertelsmann discusses important recent case law and legislation 3 Bvuma KS v Road Accident Fund 3 Motswai v Road Accident Fund 4 The Road Accident fund (transitional Provisions) Act 15 of 2012 The Road Accident Benefit Scheme Bill 4 5 CONVEYANCING MATTERS Ann Bertelsmann discusses the recent SCA judgment in Margalit v Standard Bank of SA Ltd 6 LETTERS TO THE EDITOR The General Manager responds to a letter from an attorney enquiring about cover 8 RISK MANAGER S COLUMN There has been a very busy start to the year for Road Accident Fund (RAF) practitioners, who need to meet the challenge of keeping abreast of developments in their field. If you are a practitioner who has clients who were passengers injured in motor vehicle accidents prior to 1 August 2008, please pay careful attention to the requirements and time periods set out in the Road Accident Fund (Transitional Provisions) Act 15 of ATTORNEYS INSURANCE INDEMNITY FUND NEWS FLASH IMPORTANT NOTICES AIIF: Ann Bertelsmann, Risk Manager, Aon, Risk Solutions, The Place, 1 Sandton Drive, Sandton PO Box 1847, Parklands, Johannesburg 2121 Docex 34, Randburg Tel: / 8127 Fax: Website: Prescription Alert, 2nd Floor, Waalburg Building, 28 Wale Street, Cape Town 8001 PO Box 3062, Cape Town, 8000, South Africa, Docex 149 Tel: (021) Fax: (021) info@aiif.co.za Website: Attorneys Fidelity Fund, 5th Floor, Waalburg Building, 28 Wale Street, Cape Town 8001 PO Box 3062, Cape Town, 8000, South Africa, Docex 154 Tel: (021) Fax: (021) attorneys@fidfund.co.za Website: DISCLAIMER Please note that the Risk Alert Bulletin is intended to provide general information to practising attorneys and its contents are not intended as legal advice. The Road Accident Fund (Transitional Provisions) Act 15 of 2012 (TPA) This came into operation on 13 February It will apply to all passengers claims unless, on or before 12 February 2014, you inform the RAF on the prescribed claim form that you wish the claim to be governed by the provisions of the old ACT. NB: If you wish to claim general damages under the TPA, in excess of R then you must submit an RAF 4 form on or before 12 February Kindly refer to the Act and Regulations on our website: Should you require more de tails please contact Ann Bertelsmann on or ann.bertelsmann@aon.co.za Kathy Satchwell s judgment on the prescription period for submission of the RAF4 in van Zyl MM v Road Accident Fund (case no /2009 SGHC) is going on appeal! You will also need to consider the far-reaching effects that the proposed Road Accident Benefit Scheme will have on your practice. Personal injury practitioners and their expert witnesses should take note of the harsh criticisms levelled against them by Judge Kathleen Satchwell in the two judgments discussed on pages 3 and 4.

2 RISK MANAGER S COLUMN continued... IMPORTANT NOTICE Deductibles for conveyancing claims will be increased to the same level as those for prescribed RAF matters as from 1 July All practitioners, but especially those with conveyancing practices, should take heed of the Supreme Court of Appeal s pronouncements on the duties of practitioners and especially conveyancers in the judgment discussed on page 6 to 8. CLAIMS TRENDS AS AT 31 DECEMBER Conveyancing: R Commercial: R Total: R RAF Prescription: R RAF U/S: R Litigation: R Other: R Gen. Prescription: R TOTAL INCURRED VALUES OF CLAIMS BY CLAIM TYPE FOR THE 2012 INSURANCE YEAR AS AT 31 DECEMBER 2012 (Q1 AND 2) Table 1: Comparative Analysis : Number of claims notified 2012, 2011, 2010, 2009 and 2008 as at 31 December YEAR Conveyancing RAF prescription Litigation Other TOTAL CLAIMS FOR THE FIRST 6 MONTHS OF 2012 From the pie graph and table above, the following can be seen: The total value of claims is down to R 25.3 million from R45.3 million year on year The total number of claims is down to 222 from 285 year on year RAF, conveyancing and litigation claims numbers are down year on year Conveyancing and litigation values are down year on year RAF claims values are up year on year RAF claims this year are now the highest of all claim types in frequency and value 2 Risk Alert Bulletin MAY 2013

3 RISK MANAGER S COLUMN continued... PROBLEM AREAS Unauthorised/premature payments out of trust money 15 (28%) of the 52 claims (valued at R3.3 million) arose out of the unauthorised payment of trust funds. This is approximately 60% of the value of all conveyancing matters for the period. This largely avoidable problem has led to a significantly high proportion of conveyancing claims. Practitioners continue to pay out money held in trust without the express written permission of the depositor or without there being sufficient security for the depositor. THE CONVEYANCING SCAM The conveyancing SCAM has once again been doing the rounds. Several of our more vigilant conveyancers have advised us of unsuccessful attempts by the scamsters to get them to pay over the proceeds of a property sale into a fraudster s bank account. Other attempts have unfortunately been successful, despite our efforts to publicise the modus operandi of the scamsters. The problem usually lies in the fact that conveyancers do not effectively supervise their staff or pass on important risk management information to them. Ann Bertelsmann Ann.bertelsmann@aon.co.za RAF MATTERS ROAD ACCIDENT FUND ACT 56 OF 1996 BN 6 in GG of 25 January 2013 Adjustment of statutory limit in respect of claims for loss of income and loss of support to R (Two Hundred and Four Thousand Nine Hundred and Four Rand), with effect from 31 January NEW RAF JUDGMENTS Judge Kathleen Satchwell handed down the two judgments discussed below, in the South Gauteng High Court in December All RAF practitioners should take particular notice of her statements regarding the investigation of matters, instructing of expert witnesses and their duties to the court. Bvuma KS v Road Accident Fund, GSJ (case 2010/17220, 14/ ) BACKGROUND The plaintiff was a primary school teacher who had a fractured left leg and soft tissue injury to her chest. By the time of trial, the merits had been settled and the issue of general damages had been held over for a determination by the Appeal Tribunal in terms of Regulation 3 of the Road Accident Fund Act 56 or The only issue to be determined by the Court, was that of loss of earnings/earning capacity. Resulting from the accident, the plaintiff had some difficulty in carrying out certain physical activities such as standing for long periods. She was no longer able to coach netball in the afternoons, as she had done pre-accident. Although she was still employed in her pre-accident position, the plaintiff s legal representatives alleged that she had suffered a loss of earning capacity, in that her chances of promotion had been jeopardised and that, if she were retrenched from her present position she might in the future not be able to find employment. They had obtained an actuarial report which capitalised her alleged future loss of earnings at an amount of R JUDGMENT Satchwell, J expressed displeasure at the legal representatives sausage machine outsourcing approach to Road Accident Fund litigation. She opined that the attorneys, advocates and expert witnesses all appear unaware of the paradigm within which the opinions of witnesses are admissible in evidence in court proceedings. She pointed out that an expert s opinion was only receivable into evidence and could only be relied upon, where the opinion was based on facts that had been proved by admissible evidence. Risk Alert Bulletin MAY

4 RAF MATTERS continued... The Judge remarked on the speculative nature of plaintiff s counsel s submissions. She noted that there was, for example, no information obtained through consultation with the plaintiff s employers or the Department of Education, to obtain details of the duties and responsibilities of a primary school teacher, which could support the claim. There was an absence of facts and information and no coherent and logical argument. She posed the rhetorical question: Do attorneys no longer conduct research or consult with witnesses collect information upon which expert witnesses could be asked to comment? She questioned why evidence was not obtained from the horse s mouth rather than from hearsay evidence distilled through medical experts. The Judge found that no past or future loss of earnings had been proved and dismissed the plaintiff s claim. She expressed concern that the plaintiff would have to pay the costs and opined that an order for costs de bonis propriis against the plaintiff s attorneys might be appropriate. She accordingly postponed the matter for argument on this issue. Motswai v Road Accident Fund, SA, GSJ (case 2010/17220, 7/12/2012) BACKGROUND The plaintiff suffered a sprained right ankle in a pedestrian accident in August His attorney drafted a summons claiming R plus costs and in the particulars of claim alleged that the plaintiff had suffered serious bodily injuries and a fractured right ankle. There were no facts to support this claim, either in the statutory medical reports or in the expert medical opinions. The plaintiff claimed an amount for loss of earnings, however it transpired that he had been unemployed pre-accident and had obtained employment three days a week some time post-accident. The matter had been settled on the steps of court and the only outstanding issue to be argued before the Court, was a claim by the plaintiff for R550 damages for time that would be taken off work to attend physiotherapy sessions recommended by the medical expert. The parties had agreed to apportion blame 80:20 in favour of the plaintiff. A draft settlement agreement had been drawn up by the parties, providing for an undertaking by the RAF for 80% of the plaintiff s medical costs and for payment by the defendant of 80% of the plaintiff s costs on the High Court scale. JUDGMENT Satchwell, J took the plaintiff s attorney to task for, as an officer of the Court, having drafted and signed particulars of claim containing averments that were patently untrue. She found that the plaintiff would be able to attend physiotherapy sessions on the days on which he was not working, and accordingly found that there had been no loss of earnings. The Judge criticized the RAF administrators and their legal representatives for adopting a supine and uncritical approach and the experts for preparing lengthy opinions where the injuries clearly did not warrant them. She questioned the value of an undertaking in the particular circumstances of this matter and took issue with the proposed costs order against the defendant. Satchwell, J remarked that In short, no quantifiable damages or loss was ever sustained as a result of a road accident but costs have been incurred for the benefit of those who feed off road accident fund victims. She noted that, in any event, costs should be on the Magistrates Court scale. She opined that both sets of attorneys should not be entitled to fees, that counsel should only be paid on the Magistrates Court scale and that the attorneys should be called upon to pay the medical experts fees de bonis propriis. She postponed the matter for argument on the fees issue. She also ordered that a copy of the judgment be sent to the Law Society of the Northern Provinces, the Bar Council, the Chairman of the RAF, the Health Professions Council and the Minister of Transport. THE ROAD ACCIDENT FUND (TRANSITIONAL PROVISIONS) ACT 15 OF 2012 (TPA) Summary of some of the essentials of the TPA President assented to the Bill on 10 December 2012 (GG 35979) Act came into operation on 13 February 2013 (GG3614 no3/2013) 1. A claimant who had a limited passenger s claim under the old Act (and that claim has not prescribed or been finalised by settlement or judgment) may elect to remain subject to the old Act and must then: expressly and unconditionally on the prescribed form within 1 year of the Act coming into effect (13 February 2013) i.e. by midnight on 12 February 2014 elect to have the claim remain subject to the old Act. (s2(1)) OR 2. NB: If not the claim will automatically be subject to the new Act. Under the new Act, the claimant will have the right to claim a maximum amount of R for general 4 Risk Alert Bulletin MAY 2013

5 RAF MATTERS continued... damages (non-pecuniary loss) (s 2.(1)(b)) UNLESS an RAF 4 form is submitted within two years from i.e. by midnight on 12 February 2015 (s2.(1) (b) (i)) The claimant must make a written declaration under oath on the prescribed form regarding compensation already recovered (from the driver, owner etc, interim payments, COID (s2.(1)(d)) no time limit given, but presumably within a reasonable time Claim will be reduced by these amounts (s2.(1)(c)) Action instituted in Magistrate s Court prior to 13 February 2013 can be withdrawn and instituted in High Court within 60 days from withdrawal without prescription being raised during that period. (s2.(1)(e) (ii)) Road Accident Benefit Scheme (RABS) Bill (Published for comment in GG36138 on 8 February 2013) The aim of RABS (which has already been approved by Cabinet) is to: provide for a social security scheme for the victims of road accidents; establish the Road Accident Benefit Scheme Administrator to administer and implement the scheme; provide a set of defined benefits on a no-fault basis to persons for bodily injury or death caused by or arising from road accidents; and exclude liability of certain persons otherwise liable for such damages in terms of the common law; and to provide for matters connected therewith. RABS will replace the current fault-based system provided for by the Road Accident Fund Act 56 of S 58 (2)(b) stipulates that the RAF will cease to exist and all its assets, liabilities, rights and obligations, existing as well as accruing, will devolve upon the Administrator. s 59 amends the current RAF Act by inserting s 1A which provides that the RAF s liability will be limited to accidents which occurred prior to the commencement of RABS. s 58 (3) stipulates that the Administrator must ringfence the administration of the compensation provided for in the Road Accident Fund Act, Some of the relevant provisions are: The Administrator will administer and implement the scheme and will inter alia help claimants to submit claims, but will also assess and accept or reject them and determine appeals in respect of entitlement and provision of benefits. Limited benefits will be provided on a no-fault basis. No provision whatsoever is made for general damages. Provision is made for temporary income support to injured persons and also for vocational training programmes (long term income support is also provided for). Liability of certain persons otherwise liable for such damages in terms of the common law is excluded.the Administrator s liability to contribute to the costs of professional and other fees for preparation for the submission of a claim or appeal is excluded.the time periods (applicable to both claimant and administrator) are all extremely limited ranging from 30 to 180 days, depending on the nature of the claim and stage in the claims proceedings. Ann Bertelsmann Ann.bertelsmann@aon.co.za Does your firm handle time-barred matters e.g. RAF claims? Are you at risk of allowing these claims to prescribe? If your answer is YES to either question We have the ANSWER... Register your firm today with PRESCRIPTION ALERT IT IS FREE!! HOW DO YOU REGISTER? Contact Prescription Alert on: WHAT ARE THE ADVANTAGES: We offer a free service to all practising attorneys. Your firm is allocated a firm number. Each time-barred matter registered receives its own reference number linked to your firm number. We provide regular reminders from 3 months up to 1 day prior to prescription. You can elect to receive your reminder via docex, regular mail or . You can register you claims online on our website: Did you know? IF AN RAF CLAIM PRESCRIBES WITHOUT YOUR USING THE PRESCRIPTION ALERT SYSTEM, THE DEDUCTIBLE IS INCREASED BY 15% Is it worth the risk when you can register for FREE?!! Risk Alert Bulletin MAY

6 CONVEYANCING MATTERS IMPORTANT NOTICE Deductibles for conveyancing claims will be increased to the same level as those for prescribed RAF matters as from 1 July RECENT CASE LAW Margalit v Standard Bank of SA Ltd (883/2011) [2012] ZASCA 208 (3 December 2012) Summary: Conveyancing attorney transfer delayed due to conveyancer s negligence conveyancer liable for damages suffered by seller of property due to the delay. BACKGROUND First respondent, STANDARD BANK OF SOUTH AFRICA LTD held two mortgage bonds over an immovable property. These bonds had to be cancelled prior to transfer. The bank appointed second respondent, NELSON BORNMAN AND PARTNERS INC to cancel the bonds on its behalf. Appellant was the former owner of the immovable property which had been sold to a third party in May It took one year (until 16 July 2008) before the bonds were cancelled and transfer and payment to seller were finalised. Although the transferring attorneys had applied immediately for the rates clearance certificate, this was only provided on 30 April 2008, causing a lengthy delay. Alleging that some of the delay in transfer was attributable to second respondent s unprofessional conduct, appellant brought an action out of the Magistrates Court claiming damages for lost interest on the net price of R2.9 million, after payment of estate agent s commission of R Appellant sued first respondent for breach of contract and second respondent in delict. The Magistrates Court upheld the claim and granted judgment for R (the amount agreed on by the parties if the claim were to succeed). It was calculated in respect of lost interest for the two and half months from 28 May 2008 by which date the parties agreed that the transfer should have been registered to 16 July 2008, when the transfer was registered). On appeal, the South Gauteng High Court (SGHC) overturned the judgment and granted absolution from the instance. SUPREME COURT OF APPEAL (SCA) JUDGMENT The SCA upheld the appeal against the SGHC judgment. It noted that there had been two mortgage bonds in favour of Standard Bank over the property (one registered in 1989 and the other in 1991). The parties had agreed that it was a term of the Standard Bank s bonds that, on providing a guarantee for payment of the amount secured, appellant would be entitled to cancellation of the bond, and that such cancellation would be effected by either Standard Bank or its agent in a professional and businesslike manner. The Court noted that appellant ascribed certain of the delays that occurred in the transfer process to second respondent s negligent failure to act in a professional and businesslike manner, which rendered second respondent liable in delict and also constituted a contractual breach of the terms of the bonds. The SCA stated that it was necessary to take cognizance of the processes to be followed in the transfer process, in order to evaluate second respondent s conduct. It noted that the following three transactions (in this case involving three different sets of attorneys) were to have taken place simultaneously in the Deeds Registry: 6 Risk Alert Bulletin MAY 2013

7 CONVEYANCING MATTERS continued... i) Transfer of ownership from the seller to the purchaser. ii) Cancellation of the existing bond. iii) Registration of the new bond over the property. The following facts were discussed and considered: Appellant had forgotten about bonds registered over the property in Standard Bank s favour when he approached the transferring attorney. Second respondent had initially written to the transferring attorney, enclosing a copy of the title deed, the guarantee requirements and confirming their instruction to cancel one bond (The title deed copy contained endorsements in respect of both mortgage bonds). Standard Bank had lost the original title deed and the two mortgage bonds over the property. In terms of Regulations 68(1) and (6) promulgated under the Deeds Registries Act 47 of 1937, a written application for a certified copy of the title deed may be made to the Registrar of Deeds and may be lodged simultaneously with the other transfer documents. Second respondent needed to prepare an affidavit for this application. (For some reason second respondent allegedly had a copy of the title deed bearing an endorsement in respect of only a single mortgage bond) and therefore the Regulation 68 Application in respect of the first bond only was prepared and lodged with the Pretoria Deeds Office. All three attorneys believed that there was only one bond when they prepped the documents for lodgement without referring to the second bond and lodged on 22 May The Deeds Office examiner noted that a second bond was registered over the property and rejected the transfer documents (first lodgement). By 30 May 2008, the second respondent had obtained Standard Bank s consent to cancel the second bond and a Regulation 68 affidavit, signed by an official of the bondholder. On 2 June 2008 the documents were lodged again, but this time Nedbank s attorneys failed to lodge their documents so the transfer was rejected for non-linking (second lodgement). The parties lodged again on 5 June 2008, but once again the transfer was rejected by the Deeds Office because the attorney and not a representative of the bondholder had signed the (old) affidavit in respect of the first bond (third lodgement). When the affidavit in respect of the first bond had been prepared, the attorney had signed it, as was the practice in Johannesburg at the time (2007), whereas in Pretoria it had to be signed by an official of the bondholder. (Subsequently, in early 2008, this changed and the same practice as that in Pretoria applied to all jurisdictions). A fresh affidavit was prepared for the first bond, documents were lodged on 2 July and finally transfer was thereafter successfully passed on 16 July The SCA disagreed with the reasoning of the High Court based on Nedbank s guarantee having expired and its having furnished a second one at the last minute. It also disagreed with the finding that Standard Bank had been entitled to rely on the exceptio non adimpleti contractus. The SCA then looked at the requirements for the liability of a conveyancer and stated that: Like any other professional, a conveyancer may make mistakes. But not every mistake is to be 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. It was noted that each case had to be determined on its own particular facts and circumstances and the gravity and likelihood of potential harm will determine steps, if any, which a reasonable person should take to prevent such harm occurring. Moreover, the more likely the harm the greater is the obligation to take such steps. In the case of a conveyancer, it is necessary to remember that any mistakes which may lead to a transaction in the deeds office being delayed will almost inevitably cause adverse financial consequences for one or other of the parties to the transaction. It is for that reason that in Risk Alert Bulletin MAY

8 RISK MANAGER S COLUMN continued... Christie: Fourie s Conveyancing Practice Guide (2 ed) it is observed that the financial aspects of a transfer of property are of great importance and that negligence or mistakes on the part of a conveyancer can lead to financial loss to clients rendering the conveyancer liable for damages. To avoid causing such harm, conveyancers should therefore be fastidious in their work and take great care in the preparation of their documents. Not only is that no more than common sense, but it is the inevitable consequence of their obligations imposed by s 15A of the Act read with regulation 44 both of which oblige conveyancers to accept responsibility for the correctness of the facts stated in the deeds or documents prepared by them in connection with any application they file in the deeds office. The SCA held, with regard to the first rejection, that second respondent ought to have done a proper deeds search immediately on receiving instructions from the bondholder. It noted that the copy of the title deeds sent to the transferring attorneys contained endorsements for both bonds and this had presumably been overlooked. All documents should be fastidiously examined and the conveyancer s conduct fell short of the standard of care expected of a reasonable conveyancer. With regard to the third rejection, the court drew the inference that the conveyancer knew of the new practice requirement that the regulation 68 affidavit had to be signed by the bondholder, given that he had complied with the practice when he prepared the affidavit in respect of the second bond. The Court found that the conveyancer had failed to properly check the documents (including the old affidavit) to ensure that they met the requirements for lodgement and that this evidenced a slothful approach to this important task. His conduct fell short of the standard of care expected of a prudent practitioner. The SCA held that both the first rejection on 22 May 2008 and the third rejection on 15 June 2008 were the result of the negligence of the conveyancer. (The Court did not regard the delay caused by the second rejection to be of material significance.) *Editor s note: The transferring attorney had title deeds endorsed with both bonds. It would seem that he too did not fastidiously check the documents. Ann Bertelsmann Ann.bertelsmann@aon.co.za LETTERS TO THE EDITOR Dear Mr Harban I would like to join Attorneys Insurance Indemnity Fund. Could you please inform the proper procedure? Regards X (name withheld) Good morning All practising attorneys (either in possession of a valid Fidelity Fund certificate or obliged to apply for a Fidelity Fund certificate*) are automatically covered in terms of the AIIF policy. Please have a look at the policy and the background information to the AIIF on our website *Editor s note: You are covered if you are or were a practising attorney at the time of the breach of mandate or negligent act/omission. Please note that the policy is extended to cover the acts of all employees of your practice 8 Risk Alert Bulletin MAY 2013