Herold Gie & Broadhead Inc v Harris NO and Others

The respondents were retired persons who purchased life rights (housing interests) in a retirement development scheme operated by the St Leger Trust. The purchase prices were paid into the trust account of the appellant firm of attorneys, Herold Gie & Broadhead Inc (HGB), in terms of s 6(3)(a) of the Housing Development Schemes for Retired Persons Act 65 of 1988 (HDSA), to be held pending compliance with statutory certification requirements. During 2009, each purchaser authorised HGB to release the funds to the developer, which HGB did. The required certificates under s 6(1)(a) of the HDSA were never furnished. In 2014 the purchasers cancelled the life-right agreements, and in 2016 the developer was sequestrated. After receiving dividends from the insolvent estate, the purchasers sued HGB in 2017, claiming repayment of the purchase prices under s 6(4) of the HDSA, contending that the attorneys remained liable despite having paid the funds to the developer before insolvency.

The appeal was upheld with costs. The High Court’s order was set aside, except in respect of the second separated question. The first question was decided in favour of the appellant attorneys, and the remaining issues were referred back to the High Court for determination.

This judgment clarifies the limited scope of s 6(4) of the HDSA and confirms that attorneys are not statutorily liable to refund purchase prices once entrusted funds have been lawfully disbursed to a developer before insolvency. It provides important guidance on the interpretation of protective housing legislation, the nature of trust creditors under s 6(3), and the limits of statutory protection afforded to retired purchasers, thereby offering certainty to legal practitioners handling trust monies in retirement housing schemes.