Nelson Attorneys v Smit N O and Others

The respondents were owners of adjoining immovable properties in Westering, Gqeberha, which they sold to a property developer, Headline Trading 124 CC (Status), for purposes of a consolidated residential development. Instead of receiving a cash purchase price, the respondents agreed to accept transfer of newly constructed sectional title units to be built by Status. Nelson Attorneys acted for the developer, drafted the deeds of sale and attended to transfer and consolidation of the properties. The development stalled and ultimately collapsed due to delays, lack of funding, a downturn in the property market, and the liquidation of Status and sequestration of its sole member. The respondents suffered pure economic loss as they never received the promised units or the contractual purchase price. Unable to recover from Status or its principal, they sued Nelson Attorneys in delict, alleging negligent failure to advise them of risks and to protect their interests.

The appeal was upheld with costs. The order of the full court was set aside and replaced with an order dismissing the respondents’ appeal with costs.

The judgment clarifies the proper approach to wrongfulness in claims for pure economic loss, particularly against attorneys and conveyancers. It confirms that an admission of a duty of care does not automatically establish wrongfulness and reinforces the policy-based inquiry required in such cases. The decision limits the expansion of delictual liability for losses arising from failed commercial transactions and underscores the distinction between contractual risk and delictual responsibility.