Legal Practice Council v Louw

In considering a claim for pure economic loss the high court decided that on the issue of wrongfulness there were no public or legal policy considerations that dictated that the Legal Practice Council of South Africa (the LPC) should be liable for the loss a member of the public suffered as a result of employees of the Law Society not reacting to email correspondence wherein the plaintiff sought guidance from the LPC when he suffered losses due to the under-settlement of his claim against the Road Accident Fund.

Essence

LPC successfully excepted to a claim for pure economic loss suffered by a person resulting from under-settlement of RAF claim.

Decision

(8831/2021) [2021] ZAGPPHC 796 [2021] JOL 51876 (HC) (26 November 2021)

Order:

Upheld exception and set aside particulars of claim but granted leave to amend within 30 days and awarded costs against individual.

Judges

Elmarie van der Schyff J

Heard:        9 November 2021
Delivered: 26 November 2021

Reasons

[14] . . . .

Nowhere in s 58 is it stated that the aim or purpose of the Law Society was to provide members of the public with legal or other advice. The Law Society’s object to promote discipline among practitioners can hardly be said to include a public advisory service. To find that the defendant was obliged to dole out advice would be to extend its statutory obligations and to impose an additional burden that would be unwarranted.

[15] This view is entrenched when the powers of the Law Society, as circumscribed in s 59 of the Attorney’s Act, are considered. The Law Society was not empowered to provide legal or other advice to members of the public. The statutory powers were aimed at empowering the Law Society to promote the common interest of its members.

As a result, the Attorney’s Act did not create any statutory obligation that remotely resembles a legal duty to act to protect members of the public. The protection of members of the public was a corollary of the objects to maintain and enhance the prestige, status, and dignity of the profession and uphold the integrity of practitioners. The Law Society protected the public’s interest by ensuring that attorneys adhere to a strict ethical code and taking disciplinary action when the required standard of conduct was not met. However, the Attorneys Act did not establish a relationship of any nature between individual members of the public and a Law Society.”

Quotations from judgment

Note: Footnotes omitted and emphasis added

[1] This is an exception by the defendant to the plaintiffs particulars of claim on the basis that the claim is bad in law and that the particulars of claim lack averments to sustain a cause of action. The parties are referred to as in the action.

[2] When an exception is considered, a court accepts for the sake of considering the exception that a plaintiff will be able to make out the case it pleaded in the particulars of claim. In the present matter, the plaintiffs claim is for pure economic loss suffered as a result of an omission by the defendant.

The origin of the plaintiffs claim is the under-settlement of a damages claim against the Road Accident Fund by Hauptfleisch Attorneys on 22 July 2015. This negligent under-settlement entitled the plaintiff to a claim against Hauptfleish Attorneys for R1 411 653.07.

The plaintiff lodged a claim with the then Law Society of the Northern Provinces (the Law Society), the defendant’s predecessor, and has been in constant communication with the Law Society and the Attorneys Fidelity Funds since 2015. These two bodies each referred the plaintiff to the other.

The director of Hauptfleisch Attorneys was struck from the roll on 15 February 2018, and the firm was placed under the curatorship of Ms. Lekgetho, employed by the Law Society. The plaintiff made numerous requests to the Fidelity Fund and the defendant to assess the fees of Hauptfleisch Attorneys and was informed that they could not conduct an assessment as the file was not in their possession. On 20 February 2018, he sent an email to representatives of the Attorneys Fidelity Fund.

He copied the Law Society therein and, amongst others, requested ‘guidance for the under settlement’ of his claim. The matter of under-settlement and the request for guidance was thus brought to the attention of the Law Society.

Notwithstanding, the Law Society failed to respond to the plaintiff. The plaintiff failed to institute a claim against Hauptfleish Attorneys for the loss suffered as a result of the under-settlement of his claim against the Road Accident Fund and the claim prescribed on 22 July 2018. The defendant only advised the plaintiff to obtain legal advice in a letter dated 2 November 2020.

[3] The plaintiff states that the Law Society, as the LPC’s predecessor, was a statutory body established in terms of and regulated by the Attorneys Act 53 of 1979. This Act regulated the legal profession. In terms of s 59(k) of the Act, a society may, for the purpose of achieving its objects, generally, do anything necessary for or conducive to the attainment of the objects of the society in terms of s 58 of the Attorneys Act, which among others include:

  • To maintain and enhance the prestige, status, and dignity of the profession;
  • To encourage and promote the efficiency in and responsibility in relation to the profession; and
  • To uphold and improve the standards of professional conduct and qualifications for practitioners.

Based on these objects of the Law Society, and the provisions of s 59(k) of the Attorneys Act, the plaintiff claims· that the Law Society had a legal duty to guide him as per his request. As a result of the Law Society’s failure to provide such guidance, he suffered a loss.

Discussion

[4] The defendant correctly submits that since it is trite that negligent conduct giving rise to damages is not actionable per se, the primary question to be answered in this exception is whether the defendant’s omission to provide the plaintiff timeously with guidance to seek legal advice before his claim against Hauptfleisch Attorneys prescribed, was wrongful.

[5] The question of wrongfulness is quintessentially a matter that is capable of being decided on exception.2 The plaintiff’s view that it is not appropriate to decide the issue of wrongfulness on exception is thus not supported by precedent. The plaintiff’s pleadings are the high-water mark of its case on wrongfulness.3

[6] Harms JA explained in Telematrix (Pty) Ltd v Advertising Standards Authority SA4 that when dealing with the negligent causation of pure economic loss, it is well to remember that the act or omission is not prima facie wrongful or unlawful.

This position was endorsed by the Constitutional Court [per Khampepe J] in Country Cloud Trading CC v MEG, Deparlment of Infrastructure Development, 5 where the court explained that:

‘There is no general right not to be caused pure economic loss. So our law is generally reluctant to recognise pure economic loss claims, especially where it would constitute an extension of the law of risk of ‘liability in an indeterminate amount of an indeterminate time to an indeterminate class.’

The test for wrongfulness assumes that the defendant acted culpably and asks whether the law should impose liability given this assumption.6

In the present matter, wrongfulness depends on the existence of a legal duty not to act negligently.

Brand JA explained in Trustees, Two Oceans Aquarium Trust v Kantey and Templer (Pty) Ltd, 7 that the imposition of such a legal duty is a matter for judicial determination ‘involving criteria of public or legal policy consistent with constitutional norms. ‘8

[71 Brand JA succinctly stated in Two Oceans Aquarium:9

‘When we say that a particular omission or conduct causing pure economic loss is “wrongful”, we mean that public or legal policy considerations require that such conduct, if negligent, is actionable; that legal liability for the resulting damages should follow. Conversely, when we say that negligent conduct causing pure economic loss or consisting of an omission is not wrongful, we intend to convey that public or legal policy considerations determine there should be no liability; that the potential defendant should not be subjected to a claim for damages, his or her negligence notwithstanding. In such event, the question of fault does not even arise. The defendant enjoys immunity against liability for such conduct, whether negligent or not . . .

When a court is requested in the present context to accept the existence of a “legal duty”, in the absence of any precedent it is, in reality, asked to extend delictual liability to a situation where none existed before. The crucial question in that event is whether there are any considerations of public or legal policy which require that extension. And as pointed out [by SCA per Nugent JA] in Van Duivenboden (para [21]) and endorsed in Telematrix (para [6]) in answering that question

“what is called for is not an intuitive reaction to a collection of arbitrary factors but rather a balancing against one another of identifiable norms”.’

[8) The Supreme Court of Appeal [per Navsa and Schippers JJA] held in Hlumisa Investment Holdings: 10

‘Imposing a legal duty on auditors in a case such as this raises the spectre of indeterminate liability. Policy considerations require that liability in delict be confined to reasonably predictable limits (15 Lawsa 3 ed para 87). Limitation of liability is therefore a key policy consideration in deciding whether pure economic loss should be actionable.

This court, citing Gaudron Jin Perre v Apand (Pty) Ltd (1999) 198 CLR 180 (HC of A) para 32, in Fourway Haulage, said that

‘[t]he first policy consideration is the law’s concern to avoid the imposition of liability in an indeterminate amount for an indeterminate time to an indeterminate class’; and that liability would be more readily imposed for ‘a single loss of a single identifiable plaintiff occurring but once and which is unlikely to bring in its train a multiplicity of actions.’ (Footnotes omitted)

[9] The question to be addressed on the issue of wrongfulness is whether public and legal policy considerations dictate that the Legal Practice Council of South Africa (the LPG), be held liable for the losses the plaintiff suffered as a result of employees of the Law Society not reacting to email correspondence wherein the plaintiff asked guidance from the LPG when he suffered losses due to the under-settlement of his claim against the Road Accident Fund.

[10] The Supreme Court of Appeal explained in Minister of Safety and Security v Van Ouivenboden: 11

‘When determining whether the law should recognise the existence of a legal duty in any particular circumstances what is called for is not an intuitive reaction to a collection of arbitrary factors but rather a balancing against one another of identifiable norms.’

[11] In Fourway Haulage, 12 the Supreme Court of Appeal provided further guidance when it stated:

‘[22] In a case like the present where the claim for pure economic loss falls outside the ambit of any recognised category of liability, the first step is therefore to identify the considerations of policy that are of relevance.

[23] The policy consideration that immediately comes to mind is directly linked to the initial doubt as to whether pure economic loss should be actionable at all.
That reason was referred to by Rumpff CJ in Administrateur, Natal v Trust Bank van Afrika Bpk (supra) – where this court eventually decided to cut the Gordian knot – (at 833A) as ‘die vrees van die sogenaamde oewerlose aanspreeklikheid’ (ie the fear of so-called boundless liability).

In the light of this fear the relevant consideration is succinctly stated as follows by Gaudron J in Perre v Arpand (supra) para 32:

‘The first policy consideration is the law’s concern to avoid the imposition of liability in an indeterminate amount for an indeterminate time to an indeterminate class.’

[12] On this aspect, the Supreme Court of Appeal concluded that liability would more readily be imposed for a single loss of a single identifiable plaintiff occurring but once and which is unlikely to ‘bring in its train a multiplicity of actions’.

In the present matter, the loss claimed was suffered by a single plaintiff. It is finite in its extent. This is however not the end of the matter.

The absence of indeterminate liability itself does not automatically give rise to the imposition of liability.13 In its quest to identify the policy considerations informing a decision regarding wrongfulness where pure economic loss was suffered, the Supreme Court of Appeal in Fourway Haulage referred to Trustees, Two Oceans Aquarium Trust (supra), where the court refused to come to the aid of the plaintiff in that matter, despite the absence of indeterminate liability, because the plaintiff was in a position to avoid the risk of loss claimed by contractual means.

[The SCA per Vivier JA] In Indac Electronics (Pty) Ltd v Volkskas Bank Ltd14 the converse held true. Here the plaintiff’s inability to protect itself by way of contract was one of the policy reasons why the court decided to impose liability on a collecting bank.

[13] In the present matter, the plaintiff cannot be said to be vulnerable to the risk of harm. Although the circumstances do not support a finding that he could protect his interests by way of contract, it is not to say that he could not protect himself against the risk of the particular loss by other means.

The plaintiff could protect himself by timeously obtaining legal advice from an attorney and issuing summons against his erstwhile attorney. If it acted on the email, the defendant would only have informed the plaintiff to obtain legal advice, as it did in 2020.

The plaintiff’s failure to protect his interests by obtaining legal advice from a legal practitioner cannot, in my view, render the defendant liable for the losses suffered by him.

[14] Another policy consideration why the extension of delictual liability is sometimes refused that was highlighted in Fourway Haulage, 15 is that it would impose an additional burden on the defendant, which would be unwarranted or constitute an unjustified limitation of the defendant’s activities.

It is necessary to consider the defendant’s statutory obligations to determine this aspect. In engaging in this exercise, it is in the first instance necessary to consider the aim and purpose of the erstwhile Law Society of the Northern Provinces.

The Law Society aimed to promote the common interest of its members, having regard to the broader interests of the public whom the profession served. This is evident from s 58 of the Attorney’s Act:

’58. Objects of society. -The objects of a society shall be-
(a) to maintain and enhance the prestige, status, and dignity of the profession;
(b) to regulate the exercise of the profession;
(c) to encourage and promote efficiency in and responsibility in relation to the profession;
(d) to deal with all matters relating to the interests of the profession and to protect those interests;
(e) to uphold the integrity of practitioners;
(f) to uphold and improve the standards of professional conduct and qualifications for practitioners;
(g) to provide for the effective control of the professional conduct of practitioners;
(h) to promote uniform practice and discipline among practitioners;
(i) to encourage the study of the law;
(j) to initiate and promote reforms and improvements in any branch of the law, the administration of justice, the practice of the law, and in draft legislation;
(k) to represent generally the views of the profession;
(l) in the interests of the profession in the Republic, to co-operate with such other societies or bodies of persons as it may deem fit.’

Nowhere in s 58 is it stated that the aim or purpose of the Law Society was to provide members of the public with legal or other advice. The Law Society’s object to promote discipline among practitioners can hardly be said to include a public advisory service. To find that the defendant was obliged to dole out advice would be to extend its statutory obligations and to impose an additional burden that would be unwarranted.

[15] This view is entrenched when the powers of the Law Society, as circumscribed in s 59 of the Attorney’s Act, are considered. The Law Society was not empowered to provide legal or other advice to members of the public. The statutory powers were aimed at empowering the Law Society to promote the common interest of its members.

As a result, the Attorney’s Act did not create any statutory obligation that remotely resembles a legal duty to act to protect members of the public. The protection of members of the public was a corollary of the objects to maintain and enhance the prestige, status, and dignity of the profession and uphold the integrity of practitioners. The Law Society protected the public’s interest by ensuring that attorneys adhere to a strict ethical code and taking disciplinary action when the required standard of conduct was not met. However, the Attorneys Act did not establish a relationship of any nature between individual members of the public and a Law Society.

[16] In light of the principles set out above, I am of the view that the exception is to be upheld. The allegations relied upon by the plaintiff in the particulars of claim do not, in my view, establish a cause of action on the basis that the defendant owed the plaintiff a legal duty and that its breach thereof was wrongful.

I must therefore uphold the defendant’s contention that the particulars of claim, read as a whole, do not disclose a cause of action.

ORDER

In the result, the following order is made:

1. The exception is upheld, and the plaintiff’s particulars of claim are set aside;
2. The plaintiff is given leave to amend the particulars of claim, if so advised, within 30 days of the date of this order;
3. The plaintiff is to pay the costs of the exception.

Court summary

Summary