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Risk Alert August 2013

29 August 2013

As will be seen from the graph below, conveyancing notification numbers represent an unacceptably large slice of the claims pie. Claims arising out of the unauthorised or premature payment of trust funds continue to be a major problem and 36 (41%) of the 87 conveyancing claims (valued at R8.6 million) fall into this category. This represents approximately 66% of the value of all conveyancing matters for the period.

Practitioners continue to pay out money held in trust without the express permission of the depositor or without there being adequate security in place. These payments are usually made as a result of either -

  • fraud on the part of the payee; or
  • fraud on the part of the person instructing the conveyancer to pay a third party; or
  • the mistaken belief that a conveyancer only has a duty of care towards his own client and should only take instructions regarding payment from his own client – regardless of who the depositor is; or
  • the depositor’s instructions; or
  • failure to advise a depositor of the dangers of paying money over without adequate security; or
  • failure to ensure that adequate security is in place in accordance with the depositor’s instructions; or
  • payment instructions from a person who does not have the necessary authority to act on behalf of an entity or other party; or
  • payment instructions of only one of the spouses/ co-owners of a property; or
  • failure to note that certain suspensive conditions in an agreement have not been fulfilled; or
  • failure to note the interests of another party (eg the South African Revenue Service).

General Prescription claims are still a cause for concern, with an increase of 45% in the number of claims year on year.

(Please read the Risk Alert Bulletin 4/2012 and 5/2012 (August and November) in which you will find a Prescription Table and tips on avoiding prescription. Back copies of the Bulletin can be found on our website www.aiif. co.za.)

In the first nine months of the 2012 year, RAF/ MVA prescriptions are ahead of all the other claim types including conveyancing both in number (90) and total incurred value (R13.1 million).

Claims arising out of conveyancing and prescribed RAF/ MVA matters represent the bulk of the total number and value of claims for the 2013 year so far.

AIIF Risk Alert August 2013

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