¹In Royal Anthem Investments, a dispute arose with regards to a written agreement of sale concluded by the parties on 1 June 2009. Yuen Fan Lau and Shun Cheng Liang, the first and second respondents respectively, agreed to pay the appellant, Royal Anthem Investments 129 (Pty) Ltd, a purchase price of R3, 6 million for certain immoveable property situated on a golf estate. The sale failed and the respondents sought to recover both the deposit and the transfer duty which they had paid to the attorneys appointed to attend to the transfer.

The sale was made conditional upon the respondents being able to raise the necessary finance to pay the purchase price.  The appellant instructed its conveyancing attorneys to withhold the repayment on the basis of a clause in the sale agreement which provided that on cancellation of the contract, the appellant was entitled to keep any other amounts payable. The respondent instituted action against both appellants and attorneys in the North Gauteng High Court.

High Court

The respondents claim was upheld and it was ordered that the appellant had to repay the deposit and the transfer duty paid to the respondents.

Supreme Court of Appeal

Leach JA (Ponnan and Mhlantla JJA, Mathopo and Mocumie AJJA concurring) held that as a general rule a failure of the agreement obliged the parties to restore each other to the position they were in immediately before the conclusion of the agreement. In this instance a purchaser who paid a portion of a purchase price as a deposit was generally entitled to be repaid that sum. However the duty to restore could be excluded by an agreement between parties in respect of a penalty clause.

The amount which the appellant could keep in respect of the agreement concluded was one received and held by it and not the amount which was paid to its conveyancing attorneys, which was accordingly held in trust pending the finalisation of the transfer. In respect of the transfer duty the court held that the amount was never payable to, paid over, nor held by or on behalf of the appellant. Therefore it was never an amount which the appellant was entitled to ‘keep’. At the time of cancellation, the transfer duty had already been paid over to SARS and was not available to the appellant to keep.

Conclusion

In instances wherein a deposit and transfer duty is paid by a purchaser to a conveyancer and the said sale lapses as a result of a non-fulfilment of a suspensive condition, the conveyancer in this instance is obliged to repay the deposit and transfer duty to the purchaser and cannot hold the deposit and transfer duty on behalf of the seller.  

Written by Meegan Henkeman, Schoemanlaw Inc.

Notes:
1 Royal Anthem Investments 129 (Pty) Ltd v Yuen Fan Lau (941/2012) (2014) ZASCA 19 (26 March 2014)