Fraud in property sale

Legal matters with Arthur Marara

Part II

On October 31, 2012, a real estate firm (hereinafter referred to as the “firm”) was given a mandate to sell an immovable property, namely, Stand 11499 Glen View Township measuring 442 square metres, also known as Number 11499 Glen View 7, Harare, by a  person purporting to be one Mary Fungai Pisira.

The firm (first defendant) duly advertised the property in The Herald. One Voster Sawaya (second defendant), who had previously been approached by one Daphine (the plaintiff) seeking an immovable property to buy, duly contacted Daphine Nyandoro and advised her on the Glen View property.

Daphine, upon viewing the stand, expressed interest in the property.

Sawaya, at all material times, was acting during the course and scope of his employment with the firm.

The plaintiff paid the agreed purchase price of US$11 000 into the first defendant’s trust account on the morning of November 8, 2012, before signing the written agreement of sale in the afternoon of that same day.

The agreement of sale was concluded and payment of the purchase price into the first defendant’s account was made without the purported seller and the buyer meeting.

Around November 20, 2012, the plaintiff met the purported seller at the first defendant’s office, where she was given the documents that had been outstanding pertaining to the property.

In the meantime, on November 12, 2012, the plaintiff had, at the request of the second defendant, written a letter authorising the first defendant to release the purchase price upon the seller providing the outstanding documents. Thus, when the seller provided the outstanding documents on November 20, the defendants paid the purchase price.

When the plaintiff tried to make improvements to the property, she was accosted by persons who claimed to be children of the owner of the property.

The plaintiff was advised that the owner of the stand had died in December 2004.

In the wake of this, the plaintiff issued summons against the seller Pisira seeking specific performance, only to be met by information from the legal practitioner of the estate that the said Pisira died in 2004 and so could not have sold the property in 2012.

The plaintiff reverted to the defendants with the information but the defendants could not refund her the purchase price she had paid.

It was then that she instituted the proceedings alleging that she had suffered damages in the sum of US$11 000 as a result of the second defendant’s negligence.

She alleged that the second defendant was acting within the course and scope of his employment with the first defendant, hence the first defendant was vicariously liable for the negligence of the second defendant.

The particulars of negligence alleged against the second defendant were that:

1. i) He did not at the critical time take steps to verify or ensure the true identity of the seller; or
2. ii) He did not take the necessary steps to verify if there was consent from the Harare City Council regarding the sale of stand 11499 Glen View Township; and/or

iii) He released the purchase funds to the purported seller before verifying the authenticity of the seller’s identity documents as well as the right, title and interest in Stand Number 11499 Glen View Township.

The claim was opposed by the defendants, who argued that they were not responsible for the plaintiff’s loss.

The defendants in their submission in essence were seeking that loss should lie where it is as they did what they could. In this regard, counsel referred to Music Room (Private Ltd v ANZ Grindlays Bank of Zimbabwe 1995(2) ZLR 167(H) wherein the court held that when a reasonable person is likely to say that both parties were victims of fraud, the Defendant should not be held accountable for fraud suffered by the plaintiff.

 

 

However, in that case, court also held that:-

“ . . . for a claim for damages for purely economic loss to succeed, not only must there have been negligence on the part of the defendant but, in the circumstances of the particular case, the defendant must also have owed a legal duty of care to the plaintiff to avoid causing him such loss by his negligence.”

Upon considering the circumstances of that case which included the negligence of both the plaintiff’s employee and the defendant’s employee the court then held at 168E-F that:

“.. in the circumstances of this case it would not be in the interest of society to impose a legal duty of care on the bank in respect of economic loss suffered by the plaintiff. The legal convictions of the community did not demand that this negligent act be regarded as unlawful. A reasonable person is likely to say that both parties were victims of fraud and the loss should lie where it falls.”

Considerations of legal duty of care and legal convictions of the community are critical. The circumstances of each case must be considered on their own merits. We shall look into the concept of Duty of Care in the coming article.

In Daphine Nyandoro versus Deep Horizon Real Estate Agents and Voster Sawaya HH 461/18 (case with the facts stated above), Chitakunye J held that there was no negligence on the part of the plaintiff. The responsibility was on the second defendant, as the face and agent of the seller to ensure that he had verified the true identity of the seller and that he had not been given the mandate to sell by a fraudster or imposter. Any failure in that regard was bound to have devastating ramifications as the plaintiff was bound to rely on his professional diligence.

In the coming article, we are going to explore in greater depth the concept of “duty of care”, and share some more authorities on the principle as well.

LEGAL DISCLAIMER: The material contained in this post is set out in good faith for general guidance in the spirit of raising legal awareness on topical interests that affect most people on a daily basis. They are not meant to create an attorney-client relationship or constitute solicitation. No liability can be accepted for loss or expense incurred as a result of relying in particular circumstances on statements made in the article. Laws and regulations are complex and liable to change and readers should check the current position with the relevant authorities before making personal arrangements.

 

Arthur Marara is a corporate law attorney practicing law in Harare, Zimbabwe. He is also a notary public and conveyancer. He is also passionate about labour law, commercial, and family law and promoting legal awareness and access to justice. He writes in his personal capacity. You can follow him on social media (Facebook Attorney Arthur Marara), or WhatsApp him on +263780055152 or email [email protected]