Royal Anthem Investments 129 (Pty) Ltd v Yuen Fan Lau

On 1 June 2009, the respondents (a married couple) agreed to purchase immovable property from the appellant for R3.6 million. The respondents paid a deposit of R720,000 and transfer duty of R264,723 to the conveyancing attorneys (first defendant) appointed by the appellant. The sale was subject to the suspensive condition that the respondents secure a loan of R3,060,000 by 31 July 2009. The second respondent initially applied to Absa Bank on 20 July 2009, which was rejected by 31 July 2009. Due to a default judgment issue against the second respondent's close corporation, the matter was delayed. Eventually, Standard Bank agreed to provide finance on 18 September 2009, and the respondents paid the required transfer duty. However, on 26 November 2009, the appellant demanded interest for delayed transfer. The respondents then claimed the sale had lapsed due to non-fulfilment of the suspensive condition by 31 July 2009. The appellant disputed this and eventually purported to cancel the sale. The property was sold to a third party. The conveyancing attorneys, acting on the appellant's instructions, refused to repay either the deposit or the transfer duty. The respondents instituted action for repayment of both amounts.

• Whether the deposit paid to the conveyancing attorney should be repaid to the purchaser following cancellation of the sale
• Whether clause 6 of the agreement, entitling the seller to 'keep any other amounts payable', included the deposit held by the conveyancing attorney
• Whether the transfer duty paid should be repaid to the purchaser after it was reclaimed from SARS
• What rate of interest is payable on the deposit and from what date
• Whether the conveyancing attorney received the deposit as agent of the seller or in another capacity

The appeal was dismissed with costs. Paragraphs 1 and 2 of the high court order were amended to provide that: (1) The first defendant (conveyancing attorney) must pay the plaintiffs (a) R720,000; (b) whatever interest accrued on that sum in the interest-bearing account up to 9 December 2009; (c) interest on R720,000 at 15.5% per annum from 10 December 2009 to date of payment. (2) The first defendant must pay the plaintiffs R264,723 with interest at 15.5% per annum from 29 June 2011 to date of payment. Costs were awarded against the appellant, including costs of two counsel on an attorney-and-client scale.

Where a deposit is paid to a conveyancing attorney to be held in trust pending registration of transfer, and transfer does not occur, the deposit must be repaid to the purchaser unless there is a clear contractual provision entitling the seller to retain it. A clause entitling a seller to 'keep any other amounts payable' on breach by the purchaser does not extend to a deposit held by the conveyancing attorney in trust, particularly where the agreement distinguishes the deposit from 'other amounts' and provides for its repayment in certain circumstances. Similarly, transfer duty paid to a conveyancing attorney for the purpose of paying SARS, which is subsequently reclaimed from SARS after the sale fails, must be repaid to the purchaser as it was never an amount payable to or held on behalf of the seller. The general rule that parties must be restored to their pre-contractual position upon failure of an agreement applies unless clearly excluded by the terms of the contract.

The court noted the 'somewhat vexed question' of whether a conveyancing attorney holding purchase monies pending transfer receives them as agent of the seller, the buyer, both parties, or as 'trustee for both to await the event', referring to conflicting judgments in Minister of Agriculture and Land Affairs v De Klerk 2014 (1) SA 212 (SCA). Leach JA expressly refrained from deciding this issue, noting that it was unnecessary to resolve in the circumstances of the case, and observing that each case must be considered in light of its own particular facts and contractual terms. The court also commented critically on the quality of the drafting of the agreement, describing clause 3 as 'a model of neither language nor precision'.

This case clarifies important principles regarding the treatment of deposits and other payments made to conveyancing attorneys in property transactions that fail to complete. It establishes that payments made to conveyancing attorneys in trust pending transfer are not automatically available to the seller to 'keep' under penalty or forfeiture clauses. The judgment reinforces the principle that parties must be restored to their pre-contractual position when an agreement fails, unless clearly and specifically excluded by agreement. The case also provides guidance on the construction of contractual clauses purporting to allow sellers to retain amounts paid, confirming that such clauses must be interpreted restrictively and in context with other provisions of the agreement. It is particularly significant for conveyancing practice in South Africa regarding the obligations of attorneys holding funds in trust.