Eyeluth Properties (Pvt) Ltd v Roy Harvey

The plaintiff, Eyeluth Properties (Pvt) Ltd, was a shelf company purchased by Mr R.J. Lovatt and his wife to hold immovable property. The plaintiff entered into an agreement to purchase property at 439 Blair Road, Borrowdale for $135,000.00 from Richard C. Leach, who was represented by the defendant, a legal practitioner also acting as conveyancer. The plaintiff paid $127,237.50 into the defendant's trust account. After discovering a boundary wall encroachment issue, Mr R.J. Lovatt instructed the defendant to invest the trust funds with Tetrad Asset Management at 13% per annum interest until the boundary issue was resolved. The defendant failed to invest the funds and did not communicate with the plaintiff regarding the instruction. The boundary issue was resolved on 20 November 2012. The plaintiff claimed damages of $6,754.19 representing lost interest due to the defendant's failure to invest the funds as instructed.

• Whether Mr R.J. Lovatt was the plaintiff's duly authorized representative to give investment instructions
• Whether the instruction to invest funds with Tetrad Asset Management was lawful
• Whether the defendant had a duty to invest the trust funds in an interest-bearing account
• Whose money was held in the trust account pending transfer - the purchaser's or the seller's
• Whether the defendant was obliged to invest specifically with Tetrad Asset Management
• Whether the claim was based on contract or delict
• Whether the plaintiff proved quantum of damages

The plaintiff's claim was dismissed with no order as to costs.

1. Before transfer of immovable property is effected by registration, the purchase price held by a conveyancer in trust belongs to the purchaser, not the seller. The seller only acquires ownership of the purchase price upon transfer of title to the purchaser. 2. A legal practitioner holding trust funds has a duty to invest such funds in an interest-bearing account when instructed to do so by the beneficial owner (the purchaser), but must exercise diligence and may only invest in secure institutions approved under section 13(2) of the Legal Practitioners Act (banks or building societies), not high-risk investments. 3. In an Aquilian action for damages, the plaintiff bears the onus of proving not only liability but also the quantum of damages. Where evidence of the extent of damages is available to the plaintiff but not produced to the court, the court will not speculate or estimate damages and the claim will fail for failure to prove quantum.

The court made observations about the alter ego relationship between Mr R.J. Lovatt and the plaintiff company, noting that the company was merely a vehicle for holding property on behalf of Mr Lovatt and his wife, though the court noted it was not necessary to fully determine this issue. The court also noted that applications for absolution from the instance should be granted sparingly and only in the interests of justice, preferring to conclude trials and give wholesome judgments. The court observed that the narrow interpretation given by the defendant to the directors' resolution authorizing Mr Lovatt was misplaced. The court also commented that the issue of illegality raised by the defendant appeared to be an afterthought not raised at the time of the instruction.

This case clarifies important principles in Zimbabwean law regarding: (1) ownership of purchase monies held in trust by conveyancers pending property transfer - confirming that such funds remain the purchaser's property until transfer is effected; (2) the duties of legal practitioners holding trust funds under section 13(2) of the Legal Practitioners Act to invest only in secure, approved institutions (banks or building societies); (3) the requirements for proving quantum of damages in Aquilian (delictual) actions; and (4) the principle that where evidence of damages is available to the plaintiff but not produced, the court will not engage in speculation or guess work to assess damages. The case demonstrates that while a conveyancer may be found liable in principle for failing to invest trust funds, the plaintiff must still discharge the onus of proving the extent of damages with proper evidence.